Tuesday, June 02, 2009

What 'Advice' Will Artie Levitt Give Goldman Sachs?

I've been scratching my head today --- and I don't advise it, as it causes a sore -- trying to figure out the kind of "advice" that Goldman Sachs is going to get from its new "advisor," the overrated former chairman of the SEC, Arthur Levitt.

Why would anyone want "advice" from an Arthur Levitt? I was stumped, I must say. But then a couple of thoughts that come to mind about Levitt's new gig:
  • Gratitude. Goldman and the rest of the Street owe Levitt, bigtime. When he was chairman of the SEC, the agency did absolutely nothing to regulate derivatives or hedge funds, did nothing to rein in executive compensation, took only tepid steps to curb brokerage sales practices. In general, you name it, Artie didn't do it.
  • Fig leaf. The Reuters story says that Levitt will "provide Goldman with strategic advice in a number of areas, namely public policy." OK, there's a clue. He has an undeserved reputation as an "investor advocate," as I detailed in Wall Street Versus America. So I suppose Goldman can use Levitt as a fig leaf for whatever policies it favors that are contrary to the public interest.
But perhaps most of all:
  • Doubletalk. As Francine McKenna explained in Huffington Post a couple of months ago, Artie is an expert at talking out of two, sometimes more sides of his mouth. Her focus was on the great job Artie in a similar role at AIG.
McKenna had pertinent questions:

Why did Levitt go to work for AIG again in 2007 after his stint there in 2005? Why did he help paper over their decision at the end of 2007 to re-appoint PricewaterhouseCoopers as their auditor, even after all of the messes PwC has presided over, been sued over and settled over, looked the other way on, and acted on only when forced by threat of more litigation?

Arthur Levitt and his AIG auditor selection committee didn't fire incorrigible but complicit PwC at the end of 2007. They reappointed them so PwC could stay close and no other firm get closer once the investigations for 2007 activities started. It wasn't long before the Department of Justice asked the SEC to turn over evidence as part of a criminal investigation of whether the material weaknesses in internal control cited by PwC in February 2008 were part of a fraud, one that their auditors didn't "detect" until the subprime crisis heat was on.

PricewaterhouseCoopers earned over $120 million dollars as AIG's auditor and tax advisor in 2007. Why is there no outrage by Mr. Levitt and the press over that outrageous waste of shareholders money?

Why? Because Artie was being Artie. That's why. I'd say Goldman Sachs made a brilliant move.

© 2009 Gary Weiss. All rights reserved.

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