Paying To Pay-To-Play A Pretty Good Deal

$100K for two years' worth of fees on $530.5M—not bad.
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Around this time two years ago, Goldman Sachs began hammering out a new policy on political contributions. Essentially, it said that anyone who is anyone at 200 West shouldn’t be making them. At all. For the sake of argument, let’s accept the official rationale, which was to avoid inadvertently violating the SEC’s pay-to-play rules, rather than the real reason, which was that Lloyd Blankfein and Gary Cohn (ha!) didn’t want to see too many partners getting on the Trump Train publicly and embarrassing the firm.

100k

You see, back in 2006, New York Comptroller Alan Hevesi resigned in disgrace for steering state pension money to funds that contributed to his campaign, bought him plane tickets, and the like, eventually leading him to the time of his life with Ja Rule in the state pen at the hands of then-N.Y. Attorney General Andrew Cuomo. This was also around the time that the SEC was getting a lot of flack for missing out on things like the derivatives at the center of the financial crisis and a little investment scheme masterminded by a guy named Bernie Madoff. Clearly, it had to do something, and that something was to bar higher-ups at asset managers from donating to political candidates who, if elected, might have some sway over those asset managers getting some public assets to manage. Get caught, and you can’t get paid to do that for two years. So even though the pay-to-play rule wasn’t Goldman’s real motivation to bar political contributions, it was a pretty good excuse.

Turns out, even in this theoretical world, Goldman needn’t have worried. Let’s say, once again for argument’s sake, that a $1,400 gift to a mayoral candidate was sufficient to ensure $210.5 million in mandates, rather than something more like the $1.5 million that Hevesi and his cronies enjoyed. Now, the fees to be earned on $200 million sure could be pretty sizeable, as Bill Ackman would tell you. He didn’t have to worry, either, because the SEC apparently has no intention of enforcing that two-year money-making ban. Just pay your $75,000 or $100,000 fine, promise not to do it again, and you’re off on your merry way, like the apolitical guys over at Oaktree Capital Group.

Three Oaktree employees donated money to candidates for elected office in California and Rhode Island between 2014 and 2016, the Securities and Exchange Commission said in a Tuesday order. The politicians were running for positions that had influence over public pension funds, the SEC said…. The SEC didn’t name the three Oaktree employees who made the contributions, which ranged from $500 to $1,400. The positions the candidates were running for included Los Angeles mayor, California state superintendent of public instruction and Rhode Island governor, the SEC said. Oaktree didn’t admit or deny the regulator’s allegations.

Oaktree Fined $100,000 by SEC Over Conflicted Political Giving [Bloomberg]
In the Matter of Oaktree Capital Management, L.P. [SEC]

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