Bloomberg News

Goldman Sachs Wins Dismissal of Lawsuits Contesting Bonuses

September 26, 2011

(Updates with compensation figures in sixth paragraph.)

Sept. 26 (Bloomberg) -- Goldman Sachs Group Inc. won dismissal of suits over employee bonuses filed in New York by shareholders who called the awards a waste of assets.

Security Police & Fire Professionals of America Retirement Fund and Judith A. Miller sued the investment bank in December 2009, accusing directors and executives of breaching their fiduciary duties by reserving half of the company’s net revenue for employee compensation. Shareholders Ken Brown and Central Laborers Pension Fund filed similar suits the following month.

New York State Supreme Judge Bernard J. Fried ordered the lawsuits dismissed on Sept. 21, according to court documents filed today. The plaintiffs agreed to the dismissal in January 2010, after New York-based Goldman Sachs said its ratio of compensation and benefits to net revenue for 2009 was its “lowest as a public company,” Fried said in his ruling.

Fried denied the plaintiffs’ request for attorney fees and expenses, and rejected a request from Brown -- who died in December 2010 -- for an incentive fee award of $25,000. Brown’s attorney, Lynda J. Grant, didn’t immediately return a voice-mail message seeking comment on Fried’s ruling.

Pay Record

The firm, which set a Wall Street pay record in 2007, was pilloried by politicians and labor unions for its compensation practices after getting taxpayer aid during the financial crisis.

Goldman had a 2007 compensation and benefits expense of $20.2 billion, or 43.9 percent of revenue, that came to an average of $661,490 per employee, according to company reports. The pay expense dropped to $10.9 billion, or 48 percent of revenue, in 2008 and was $16.2 billion, or 36 percent of revenue, in 2009.

In July, Goldman Sachs officials set aside $8.44 billion for the company’s compensation pool in the first six months of this year. That was 9 percent less than in the same period in 2010 as revenue tumbled 11 percent.

Goldman Sachs Chief Executive Officer Lloyd Blankfein’s $19 million compensation for 2010, which included a $5.4 million cash bonus, was almost double the prior year’s award even as Goldman Sach’s profits fell.

Blankfein and other firm executives agreed to forgo cash bonuses in 2009 and take restricted stock grants as compensation to mute criticism of the firm’s pay practices. Goldman Sachs officials received billions of dollars in pay and bonuses last year while the firm settled claims by the U.S. Securities and Exchange Commission that executives misled investors in collateralized debt obligations linked to subprime mortgages.

The firm agreed to pay $550 million, the largest penalty ever levied by the SEC against a Wall Street firm, to resolve regulators’ claims that marketing materials about the investments had “incomplete information.”

Michael DuVally, a Goldman Sachs spokesman, declined to comment on the ruling.

The cases are Brown v. Blankfein, 650003/2010, and Central Laborers’ Pension Fund v. Goldman Sachs, 600036/2010, both in New York State Supreme Court, New York County (Manhattan).

--Editors: Andrew Dunn, Mary Romano

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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