Monday, August 13, 2018

Goldman Director Sues Firm For Whistleblower Retaliation


Christopher Rollins, a former managing director of American multinational investment bank and financial services company, Goldman Sachs (New York, New York), has filed a Complaint against the firm alleging to have been retaliated against for blowing the whistle on Goldman’s anti-money laundering compliance failures relating to an infamous wealthy financier based in Europe. (Christopher Rollins v. Goldman Sachs& Co. LLC, et al., Case No. 18-CV-7162 (S.D.N.Y. Aug. 9, 2018)

According to the Complaint, the financier met with two Goldman bankers, John Storey and Michael Daffey, on the financier’s yacht in August of 2015, to determine how Goldman could assist the financier in business dealings despite the financier’s checkered past. Apparently, from September of 2015 to August of 2016, Storey, Daffey and the firm’s former vice-chairman, Michael Sherwood, leveraged their status with the company and command of Goldman’s risk management systems to help effect transactions connected to the financier, circumventing Goldman’s anti-money laundering controls in the process.

The Compliant specified that transactions connected to the financier included: 1) the issuance of $1,200,000,000.00 in bonds structured by a broker whom the financier had been affiliated with; 2) the establishment of a customer account for an offshore fund which the financier controlled; 3) the creation of a London-based account for the offshore fund to effect a $400,000,000.00 trade; and 4) trading of securities of a foreign company introduced to the firm’s customers by the financier.

The Complaint alleged that Rollins and the financier met merely on a social level; no business relationship was consummated. The financier did, according the Complaint, call Rollins to discuss possible transactions, resulting in Rollins reporting his interactions with the financier to appropriate parties within Goldman.

The Complaint detailed that in August of 2016, a client of Goldman failed to pay for trades involving the securities of the foreign company introduced to the firm by the financier, causing Goldman to experience a brief $85,000,000.00 exposure. Goldman’s financial crimes compliance division, who was responsible for overseeing anti-money laundering controls, purportedly grew suspicious that the trading settlement mishap related to an unlawful pre-arranged trading scheme. The Complaint stated that officers of the financial crimes compliance division figured Rollins was a party to an unlawful scheme.

Apparently, in September of 2016, Rollins was interviewed by Goldman Sachs International’s securities compliance leader, Anil Karpal, as well as other financial crimes compliance division investigators. Rollins was seemingly advised at that time to refrain from engaging in any contact with the financier. The Complaint then stated that Rollins expressed to investigators that he was under the impression that the financier’s business dealings had been vetted through compliance. Rollins contended that he subsequently learned that investigators were not apprised of the financier’s involvement with Sherwood, Daffey and Storey; that information was deliberately concealed from Goldman’s records. In turn, Rollins was supposedly viewed by Goldman as the source of the financier’s business dealings with the firm.

In speaking with investigators, Rollins reportedly contended that his contact with the financier was reasonable and had been supported by instructions from Goldman’s compliance officer, Steven Hadermayer, who provided the greenlight to the financier’s introduction of the trading of the foreign company’s securities. Goldman’s compliance division had apparently not deemed it suspicious for the financier to be involved in those trades, and did nothing to stop those trades from being effected.

Rollins contended in the Complaint that he should have been cleared of any suspicion of wrongdoing following his interview with Goldman’s investigators, or at least not subject of an investigation by those who were tainted with conflicts. Instead, Rollins was reportedly suspended by Goldman. Over the ensuing weeks, Rollins’ suspension remained in place, and the basis of his suspension had apparently never been made clear. The Complaint revealed that Rollins soon became the primary target for the blame of the anti-money laundering compliance failures pertaining to the financier.

According to the Complaint, in an effort to determine why he was falsely accused for Goldman’s business dealings with the financier, Rollins further analyzed the transactions, finding that the questionable activities involving the financier should have altered the firm to conduct further due diligence or even file a suspicious activity report. The Complaint stated that Rollins was cognizant that Commodities and FuturesTrading Commission (“CFTC”) and Securities and Exchange Commission (“SEC”) laws and regulations mandated reasonable anti-money laundering procedures to be created and implemented by Goldman in reference to the establishment and surveillance of accounts – particularly those involving speculative or foreign companies.

The Compliant then specified that Rollins reported his suspicion about the anti-money laundering compliance failures being covered up by way of the investigation. Rollins claimed to have recalled being told by Daffey that the $400,000,000.00 trade was a mistake and that Goldman could not afford to be subject of a scandal. Apparently, Daffey caught wind of Rollins’ outspoken concerns about the investigation conducted by Goldman, and attempted to convince Rollins to take the fall for the financier’s business dealings with the firm – Rollins’ job depended on it. The Compliant stated that Rollins refused to accept the blame, resulting in Goldman’s commencement of a disciplinary proceeding in which Rollins was pressured to admit to violating compliance restrictions. The firm; however, reportedly failed to detail the restrictions it claimed Rollins violated.

According to the Complaint, Rollins confronted the firm’s treatment of him through a disciplinary hearing directed by James Esposito, but it was ultimately determined by Esposito that Rollins’ sixteen year employment with Goldman would be terminated effective February 5, 2017. Esposito’s decision was apparently founded on a pretext – he claimed that Rollins breached compliance restrictions relating to the financier’s business dealings despite failing to detail exactly what those restrictions were.

Prior to Rollins’ termination, he apparently submitted a report to Goldman of what he believed to be violations of United States law in reference to Goldman’s compliance mishaps, and complained of a bogus investigation and disciplinary proceeding having been commenced into his activities to cover up Goldman’s conduct. Moreover, Form TCRs had been submitted by Rollins to SEC and CFTC as part of his formal reporting of Goldman’s activities to those regulators.

The Complaint further alleged that Goldman, in addition to terminating Rollins for reporting the firm’s misconduct: falsified information to regulators about Rollins’ activities; defamed him to other employers; and cancelled equity awards totaling millions of dollars. Despite the statements that Goldman made to regulators, the firm reportedly established with Rollins that he never committed any unethical or illegal activities, and that he was not terminated for cause. Moreover, the firm purportedly admitted that the compliance restrictions referenced by Esposito never existed.

According to the Complaint, substantial damages have been requested by Rollins from Goldman due to the firm’s unlawful retaliation of him in violation of the Dodd-Frank Reform Act, 7 U.S.C. §26(h)(1)(A) and 15 U.S.C. § 78u-6(h)(1)(A)(i)-(iii), and for the firm’s acts of defamation and fraud.

Cosgrove Law Group, LLC represents former employees in the finance industry against their employers for U5 defamation and whistleblower retaliation. If you feel that you have been retaliated against for blowing the whistle on your employer’s actual or prospective violations of securities laws, call Cosgrove Law Group and speak to our experienced counsel today.

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