Goldman Settles Charges Of Illegally Promoting Stock

Goldman Sachs & Co. agreed yesterday to a $2 million fine to settle charges the company illegally and selectively promoted the stock of four Asian companies on the brink of going public.

The Securities and Exchange Commission alleged Goldman, a New York-based securities firm, made illegal offerings of securities to select customers in 1999 and 2000 and made inappropriate statements to the press.

According to the SEC, traders on Goldman's New York Asian shares sales desk sent "lengthy and detailed" e-mails to numerous institutional investors during the waiting period -- before the registration statement was accepted by the SEC -- about four separate initial public offerings for which Goldman served as underwriter. During the waiting period, issuers and their representatives are prohibited from making any written offerings of securities, including e-mails, except by the preliminary prospectus, without SEC clearance.

Additionally, the SEC said that a senior Goldman representative made inappropriate statements to the press -- including The Washington Post -- regarding the firm's role in underwriting PetroChina Co., a Chinese-based oil producer whose parent company invested in Sudan. Although the SEC document didn't name the senior Goldman representative, the articles it referred to quoted Goldman vice chairman Robert D. Hormats. Hormats's statements were made before the company filed a registration statement with the SEC and violated a law that prohibits any actions that may pique interest in a stock before a registration statement is filed.

As is customary in such settlements, the company neither admitted nor denied the SEC's findings. Goldman Sachs spokesman Peter Rose said the company is "pleased to put this matter behind us."

According to the SEC, on Feb. 29, 2000, the day after PetroChina filed its registration statement and during the waiting period, members of the Asian shares sales desk sent e-mails to dozens of institutional customers.

The e-mail included projections of earning growth and net income for the company, including a section titled, "SIZE DOES MATTER," characterizing the company as "the LARGEST producer of crude oil & natural gas" and "one of the Largest companies in China by revenues."

Employees were later instructed to electronically recall the e-mails in addition to alerting e-mail recipients that the e-mail was sent in error.

After investigating the e-mails, the SEC said it found the PetroChina offering was not the first time Goldman employees had improperly promoted stock.

On Oct. 12, 1999, one member of the Asian sales desk sent e-mails to roughly 90 customers urging them to buy stock in China Telecom (Hong Kong) Ltd.