Business Day Live: Regulating Against Obesity

An Honest Tea co-founder assesses bans on sugary drinks. | James B. Stewart examines Greg Smith's claims against Goldman Sachs. | A look back at Black Monday.

James B. Stewart on Ex-Goldman Executive\'s Tell-All Book

A Tell-All on Goldman Has Little Worth Telling

CBS News/60 Minutes

Greg Smith, left, whose book, "Why I Left Goldman Sachs," goes on sale Monday, is scheduled to appear Sunday on “60 Minutes.”

When Greg Smith resigned in March as an executive director and vice president of Goldman Sachs with an Op-Ed page article in The New York Times, he leveled some sweeping charges: Goldman's culture was “toxic and destructive”; the firm promoted “morally bankrupt people”; and - most devastating to any professional organization - Goldman Sachs bankers were “ripping their clients off.”

Mr. Smith's letter clearly hit a popular nerve, coming as it did during a devastating financial crisis in which Goldman emerged as the rich, arrogant and unfeeling perpetrator of much of the financial wreckage still afflicting Americans. And it's hard to quarrel with Mr. Smith's overriding message: Wall Street should put clients interests' first or risk oblivion. Indeed, that was Goldman Sachs's own credo, “Our clients' interests always come first.”

But stripped of its incendiary conclusions, Mr. Smith's manifesto was curiously short on facts. Other than the now-infamous reference to muppets - “I have seen five different managing directors refer to their own clients as ‘muppets,' sometimes over internal e-mail” - there were no examples of a toxic culture at work, no actual names of morally bankrupt people and no examples of a client getting ripped off. Mr. Smith declined to elaborate after the article was published, heightening suspense and no doubt fueling the literary bidding that reached a reported $1.5 million for a book that would deliver the goods.

That book, “Why I Left Goldman Sachs,” goes on sale on Monday. Despite tight security, copies of the book have been circulating, and I read one. The book not only fails to deliver concrete examples to back up his sweeping conclusions, but he admits changing “names or descriptors” for some (but not all) people and acknowledges that what he does disclose is “from memory.”

He says he has tried “to retain the spirit” of what actually occurred. This makes it nearly impossible to verify much of what he says.

Beyond that, from his perch on the equity trading desk he seems to have had a narrow view of the institution where he worked for nearly 12 years. His disillusionment comes across as heartfelt, but much of it seems to have come less from his own experiences than from news reports about the firm's behavior in deals he wasn't involved in.

Mr. Smith's book might even bolster Goldman's reputation. After all, if Mr. Smith is the ultimate insider, and this is as bad as it gets - Mr. Smith in a hot tub at the Mandalay Bay Hotel in Las Vegas with a topless woman - then he hasn't made much of a case.

But Mr. Smith isn't in much of a position to exonerate Goldman, either. The firm was deeply enmeshed in nearly all aspects of the financial crisis and its causes, including mortgage-backed securities. And after an injection of taxpayer support, it managed to profit handsomely and pay the lavish bonuses that Mr. Smith shared in. But you won't find that story in “Why I Left.”

Mr. Smith declined to discuss any of this before his scheduled appearance on Sunday on “60 Minutes.” Goldman Sachs responded to some of my questions with copies of parts of their internal investigation and made several employees available.

Potential problems with Mr. Smith's approach surface almost immediately. The first paragraph of Chapter 1 describes “an intern named Josh” who's being “grilled” and asked to explain risk arbitrage but “was floundering badly.” Josh, Mr. Smith adds, is the son of a billionaire.

There was no “Josh” in Mr. Smith's group of interns, and only one son of a billionaire: Teddy Schwarzman, son of Stephen Schwarzman, the chairman and chief executive of the asset management firm Blackstone Group.

“I was never grilled on risk arbitrage, or asked to give a presentation on it,” Mr. Schwarzman said when I contacted him this week. “I realize it was a long time ago, but I would certainly have remembered it if I had floundered.” Nor did anyone else in the class I spoke to recall such an episode.

A version of this article appeared in print on October 20, 2012, on page B1 of the New York edition with the headline: A Tell-All On Goldman Has Little Worth Telling.

Week in Review: Ex-Goldman Trader\'s Book Is Short on Details

WEEK IN VERSE What does Vikram Pandit want to do now? “I wanna take you out to dinner, and then I wanna go back to my apartment and watch ‘Kung Fu'. Do you ever watch ‘Kung Fu'?”

A look back on our reporting of the past week's highs and lows in finance.

Long on Pleasure, Short on Details For seven months, Goldman Sachs has been bracing itself for a repeat of the anger sparked by a former trader's Op-Ed article in The New York Times. The worry appears to be over. Mitt Romney's binder full of women has gotten better reviews than Greg Smith's memoir.

Reports based on bootleg copies indicate that the book offers few new details of illegal or questionable practices.

Nelson D. Schwartz of The New York Times wrote that the book was long on Mr. Smith's “reminiscences of the pleasures of the job - handmade suits, sashimi at 30,000 feet, strawberries at Wimbledon -” but it provided few new details of the “toxic” culture that he said prompted him to quit.

The Wall Street firm's version of boot camp for trainees, described in the book's first chapter, don't sound exceptionally harsh unless you hate early meetings and have trouble with lunch orders.

But Mr. Smith still has a chance to entice readers interested in the details of his decade-long career at the bank. On Sunday, he is set to appear on “60 Minutes.”

With Cash From Deal With SoftBank of Japan, Sprint Goes After Bigger Stake in Clearwire | “Sprint Nextel has moved to protect one of its most valuable assets - access to a big chunk of spectrum - just as it is preparing to become a more aggressive force in wireless,” Michael J. de la Merced reported. DealBook '

• Deal to Buy Sprint Is SoftBank's Biggest Gamble | Sprint “may eventually serve as a vehicle for future deals - perhaps even one for the enlarged T-Mobile, several years from now.” DealBook '
• Sprint Said to Be in Final Stages of Selling Most of Itself to SoftBank of Japan | News of the struggling cellphone service provider's move to revive its fortunes was first reported on Sunday. DealBook '

Russian Oil Company Said to Be Near Deal With BP | “Rosneft on Thursday moved nearer a deal to buy a 50 percent stake in TNK-BP, Russia's third-largest oil company, from the British energy giant,” Stanley Reed, Mark Scott and Andrew E. Kramer reported. DealBook '

Crumbling Deal Exposes a Clash of Wealthy Family Dynasties | The British financier Nathaniel Rothschild appears to have been outmaneuvered by a powerful Indonesian family in a battle for a coal mining giant, Mr. Scott reported. DealBook '

Ex-Trader's Book Offers Few Details on Goldman | Long on Greg “Smith's reminiscences of the pleasures of the job - handmade suits, sashimi at 30,000 feet, strawberries at Wimbledon -,” Nelson D. Schwartz reports that “the former Goldman salesman's book does not bre ak much new ground on illegal or questionable financial practices at the firm.” DealBook '

• Private Equity Gains Helped Lift Revenue in Goldman's 3rd Quarter | “The results were a strong contrast to the same quarter in 2011 when it reported a rare quarterly loss,” Susanne Craig reported. DealBook '
• Book by Disgruntled Ex-Salesman Offers His Analysis of the Culture at Goldman | The book is scheduled to be released on Monday, but the first chapter was available on Apple iTunes store on Oct. 15. DealBook '

Morgan Stanley Reports $1 Billion Loss but Beats Forecasts | “Earnings rebounded strongly in the third quarter as skittish clients returned to doing business with the company,” Ms. Craig reported. DealBook '

Citi's Chairman Steps Up to a Decisive Role | Michael E. O'Neill's unusual hands-on approach paved the way this week for the board to ask for Vikram Pandit's resignation, Ms. Craig and Jessica Silver-Greenberg reported. DealBo ok '

• Citigroup's Chief Resigns His Post in Surprise Step | “This is a ludicrous management transition, the worst I've seen in my 25-year career,” said Michael Mayo, an analyst at Credit Agricole Securities. DealBook '
• News Analysis: Investors Hope for Clarity, Quickly | “As Michael L. Corbat takes up the reins at Citigroup,” Peter Eavis reports that “analysts and investors have a message for him: Shrink your bank fast, and be a lot more transparent as you do so.” DealBook '
• Adept Moves in the Financial Crisis Helped Clear a Path to the Top Job | Michael L. Corbat spent years as head of Citigroup's “bad bank” of unwanted assets, Ben Protess reported. DealBook '
• Overseas Lending Offers Bright Spot for Citigroup | A wager that international lending will offset a sluggish recovery in the United States has started to pay off , Ms. Silver-Greenberg reported. DealBook '

Bank of America Posts a Profit After Charges and A ccounting Adjustments | “For most banks, a 95 percent profit plunge has all the makings of a Wall Street disaster.” But Mr. Protess reported that “at Bank of America, it was a victory of sorts.” DealBook '

BlackRock Looks to Expand Exchange-Traded Funds | The giant money management firm said that investments had increased in most of the products it manages, but Nathaniel Popper reported that the biggest increases came in E.T.F.'s. DealBook '

High-Speed Trading Firm Closes | Eladian Partners, founded less than two years ago by former Citigroup executives, is ending operations as the industry confronts a slowdown, Mr. Popper reported. DealBook '

A Push for Leniency as an Ex-Goldman Director Faces Sentencing | Federal prosecutors want Rajat K. Gupta to spend as much as 10 years in prison, but Mr. Lattman reported that defense lawyers would rather he spend time in Rwanda. DealBook '

Testifying in Britain, Volcker Questions Bank Innovation | “If complicated financial trades have a benefit for the wider economy, the former Federal Reserve chairman Paul A. Volcker isn't sure he has seen it,” Mr. Scott reported. DealBook '

N.Y.U. Law Plans Overhaul of Students' Third Year | “The usefulness of the third year of study ranks high among the growing chorus of complaints - which includes soaring tuition and a glutted job market - about law schools,” Mr. Lattman reported. DealBook '

Deal Professor: Despite Problems With Dodd-Frank, It's Better Than the Alternatives | Steven M. Davidoff says that “repealing the Dodd-Frank Act won't end “too big to fail” banks, and it may even make things worse.” DealBook '

And the capital charges would have to be agreed on internationally in order to keep American banks from being outgunned by foreign competitors. This is what the Basel III accords are supposed to do, but raising the capital or leverage limits would require a whole new international bargain.

Reporting my risk-mgmt series, was surprised at how many banks acknowledged Dodd-Frank made the system safer: nyti.ms/Wwfzh1

- Kate Kelly (@KateKellyCNBC) October 17, 2012

Fed Governor Proposes a Way to Limit Individual Bank Size | That Daniel Tarullo would say that such a structural overhaul of the financial system might be considered, was a sign that the policy debate over what to do about “too big to fail” might be shifting, Mr. Eavis reported. DealBook '

DealBook Column: Nowadays, Wall St. Saviors May Wish They Weren't | Andrew Ross Sorkin says that “the recent series of suits brought by the government may have a profound impact on how businesses react to being asked to provide assistance when the next financial crisis arrives. Chances are, they won't.” DealBook '

“Would I have done Bear Stearns again knowing what I know today?”Jamie Dimon asked almo st rhetorically last week at the Council on Foreign Relations in Washington.

“It is really close. What I know today is if they called me again to do something again like that, I couldn't do it. My board wouldn't allow me.”

A Secretary to a Salomon Is Accused of Embezzling

At 98, a venerable banker still goes to the office, even after the name of the storied investment firm he once ran has faded from Wall Street.

William R. Salomon uses space and a secretary paid for by Citigroup, which swallowed his firm, Salomon Brothers, in a merger. It is the least that the banking giant can do for the son of one of three brothers who started the firm a century ago.

But federal prosecutors say that Mr. Salomon's longtime secretary did him no favors. Karen R. Febles, his former assistant at Citigroup for over a decade, has been charged with stealing nearly $2 million from him, according to a person with direct knowledge of the case.

Court papers filed by the government in February accused Ms. Febles of defrauding a retired bank executive but kept the name of the bank and the executive confidential. The victim is Mr. Salomon, according to this person, who spoke only on the condition of anonymity.

A Citigroup spokesman, Mark Costigli o, said the bank “informed law enforcement immediately upon discovery of suspicious account activity by this former employee, and we have cooperated fully to ensure that justice is done.”

Matthew Reilly, a spokesman for the United States attorney in New Jersey, whose office brought the case, declined to comment.

Ms. Febles, 47, of Palisades Park, N.J., has pleaded not guilty and is set to stand trial in Federal District Court in Newark on Nov. 13.

Her lawyer, Edward J. McQuat, said that she “was not responsible for the government's allegations and we hope to convince a jury of that.”

Ms. Febles is hardly the first executive assistant accused of fleecing a corporate boss, a crime that investigations and securities firms say happens with some frequency. One of the more memorable incidents happened in 2002, when a secretary who worked for E. Scott Mead, a top banker at Goldman Sachs in London, was imprisoned after looting more than $5 million by wiring blocks of his money to bank accounts in Cyprus.

Experts say that these incidents arise for several reasons. Investment bankers and corporate lawyers are often on the road, working 60 to 80 hours a week, and they give secretaries a lot of discretion. They also say that class envy often factors into these crimes. And in cases like the one involving Mr. Salomon, elder abuse can play a role.

“People put an excessive amount of trust in individuals who have fiduciary duty and signing power over their accounts,” said Daniel E. Karson, chairman of Kroll Advisory Solutions, a corporate investigations firm. “And part of what goes into the larcenous thinking is that this is a wealthy person who isn't counting their nickels and dimes and will never miss the money.”

Prosecutors say that Ms. Febles worked for Mr. Salomon from 2000 until September 2011, answering his phones, scheduling his appointments and paying his bills. Mr. Salomon authorized Ms. Febles to prepare personal checks that he would sign. After he signed the checks, many of which were made out to “cash” or “petty cash,” Ms. Febles would alter the withdrawal amount and deposit excess funds in her own bank account, according to the government's complaint.

In 2010, for example, Mr. Salomon's expenses, paid in cash, totaled about $450,000, but checks in excess of $1.1 million were issued that year from his bank accounts, the complaint said. Prosecutors say that Ms. Febles was the only other person given access to his accounts.

The money, totaling $1.8 million, is said to have been stolen in small increments over a period of years. In one instance, prosecutors say, Ms. Febles made out a check for “nine hundred” dollars, but when the check was negotiated, the words “nine thousand” were added before the words “nine hundred.”

Ms. Febles lived more like a Wall Street banker than a secretary who earned no more than $93,000 a year, acc ording to court filings. Last year she paid more than $50,000 cash for a Range Rover and about $35,000 for a Mercedes-Benz. Recent cruise vacations cost her $45,000. She paid for such extravagances, the government says, by skimming from Mr. Salomon's fortune.

Born and raised in New York City, Mr. Salomon, who is known as Billy, skipped college and joined his father's firm at 19. While serving as senior managing partner for 15 years during the 1960s and 1970s, Mr. Salomon orchestrated the firm's transformation from a small bond-trading house to one of the country's largest and most profitable investment banks.

“Pleasant, well-tailored and casual, it would be easy to think of him as another example of Wall Street nepotism,” wrote The New York Times of Mr. Salomon in a 1965 profile. “Colleagues and competitors dispel that notion.”

Among Mr. Salomon's protégés was an ambitious young trader named Michael R. Bloomberg. Another was John H. Gutfreund, who succeeded him in 1978 as head of the firm. The newly minted chief executive of Citigroup, Michael L. Corbat, also began his career at Salomon.

Mr. Gutfreund presided over Salomon during a tumultuous period that ended in a scandal, drawing charges that the firm rigged the Treasury bond market. Salomon's brash, risk-taking culture under Mr. Gutfreund was chronicled in “Liar's Poker,” a tell-all memoir by Michael Lewis, who worked as a bond salesman at Salomon before he became a writer.

In a 1991 interview with The Associated Press, Mr. Salomon, embittered after a falling out with Mr. Gutfreund, lamented that the firm had lost its way.

“In my time, the customer was God and we would no more take advantage of him than we'd fly out the window,” Mr. Salomon said. “We wanted to maintain a high ethical standard.”

Salomon became swept up in the financial services mega-mergers of the late 1990s. The insurer Travelers acquired the firm in 1998 and la ter that year combined with Citicorp, which would become Citigroup.

Through it all, Citigroup provided Mr. Salomon with a Midtown Manhattan office and a secretary. A fixture of the Upper East Side old-money crowd, Mr. Salomon lives in a Park Avenue apartment and has an oceanfront home in Southampton on Long Island. He was widowed in 2008 when his wife of more than 70 years, Virginia Foster Salomon, died. It was around that time, the government says, that Ms. Febles started embezzling from him.

Mr. Salomon, who, despite his advanced age is said to have all of his mental faculties, did not return multiple calls seeking comment. Another assistant now answers his phone.

A version of this article appeared in print on 10/20/2012, on page B1 of the NewYork edition with the headline: A Secretary to a Salomon Is Accused of Embezzling.