Greenspan is questioned about gold at House committee hearing


Goldman accused of stock manipulation
during chairmanship of Senator Corzine

By Dave Boyer
The Washington Times
July 17, 2002

Sen. Jon Corzine, whose Wall Street expertise
plays a key role in Democrats' strategy on
corporate responsibility, led an investment
banking firm that is being accused of
inflating stock prices in the 1990s and
contributing to the market crash. Top Stories

Senate Majority Leader Tom Daschle lately has
kept Mr. Corzine at his side frequently as
Democrats call on President Bush to get
tougher with corporate executives who
fraudulently inflate company earnings to
boost stock prices.

"I think he's made a stellar contribution,"
said Sen. Paul S. Sarbanes, Maryland Democrat
and author of a bill approved Monday by the
Senate that would increase the penalties for
corporate wrongdoers.

But Goldman Sachs, the firm that Mr. Corzine
left as chairman in May 1999, has been a
target of class-action lawsuits and
accusations by a former broker who complained
to the Securities and Exchange Commission
that the investment house engaged in a scheme
to force unwitting investors to pay
artificially high prices for certain stocks.

Mr. Corzine, New Jersey Democrat, said he
knew nothing about such schemes when he ran
the firm from 1994 to 1999.

"I don't believe there is ever going to be
anything that sticks about us at Goldman
Sachs forcing anybody to buy anything," Mr.
Corzine said in an interview. "Goldman Sachs
never forced anyone to buy anything when I
was chairman, I can tell you that."

But Nicholas Maier, who was syndicate manager
of the Wall Street firm Cramer & Co. from
1996 to 1998, told SEC investigators in the
spring that Goldman Sachs routinely forced
him to buy stocks at inflated prices if he
wanted to purchase shares of an initial
public offering (IPO).

"Goldman, from what I witnessed, they were
the worst perpetrator," Mr. Maier said. "They
totally fueled the [market] bubble. And it's
specifically that kind of behavior that has
caused the market crash. They built these
stocks upon an illegal foundation
manipulated up, and ultimately, it really was
the small person who ended up buying in."

For example, Mr. Maier told the SEC that
Goldman Sachs would offer him shares of a new
company's IPO at the initial, low price of
$20 per share only if he agreed to purchase
"aftermarket" shares of the same company at
$100 each. In turn, he would sell the shares
of the higher-priced stock to small

"None of these aftermarket orders had
anything to do with what I honestly valued a
company to be worth," Mr. Maier said.
"Goldman created the convincing appearance of
a winner, and the trick worked so well that
they seduced further interest from other
speculators hoping to participate in the gold
rush. The general public had no idea that
these stocks were actually brought into the
world at unnaturally high levels through
illegal manipulation."

Mr. Bush on Monday said Wall Street went on a
"binge" in the 1990s and now has a
"hangover," a characterization that Mr.
Corzine called "a diversion away from

"What we had was a breakdown in corporate
ethics and corporate responsibility that I
don't think has anything to do with anything
other than excessive focus on share price and
managed earnings," he said.

Mr. Corzine retired from Goldman Sachs in
1999 after taking the firm public and
receiving $320 million worth of its stock. He
ran for the Senate in New Jersey in 2000,
spending more than $60 million of his fortune
to win the seat.

The bubble of high-priced technology stocks
began to burst in March 2000. In August 2000,
the SEC issued a warning against aftermarket
sales, also known as "laddering."

"I've never even heard the term 'laddering'
before," Mr. Corzine said yesterday. "We may
have recommended on the analysis that we had
that [a stock] was a 'good buy,' but you
can't force anyone to buy anything. Investors
make their choices about where people invest,
unless they've asked somebody to manage their

Mr. Corzine was highly respected in his
tenure at Goldman, and no one has accused him
of encouraging "laddering" or even knowing
about the practice. But Mr. Maier said it
happened on Mr. Corzine's watch.

"For Corzine not to know of a common practice
being utilized to generate and manipulate
stock prices would be surprising," Mr. Maier
said. "He was obviously there during this
time. I definitively saw his company engaged
in illegal activity."

The SEC would not comment yesterday on
whether Goldman is under investigation. Mr.
Maier said he has not spoken to the
investigators in several months.

"They expressed to me that laddering is a
trickier thing [to prove]," Mr. Maier said.
"I will say it. They did it. They laddered.
Whether the SEC can construct a case is a
different story."

Asked whether he knew about an SEC
investigation, Mr. Corzine said, "That could
very possibly be; I'm not aware of it. I'm
divorced from [Goldman] since 1999."

A class-action lawsuit filed in April 2001
accused Goldman Sachs and others of engaging
in "laddering" on the initial sale of stock
of NetZero, driving up the company's share
price to artificially high levels.

In another class-action suit, shareholders of have accused the firm and its
underwriters, including Goldman Sachs, of
engaging in a laddering scheme in its IPO in
February 2000, after Mr. Corzine left
Goldman. And investors of defunct online
grocer have filed a similar suit
in federal court concerning that firm's
initial public offering in November 1999.

Another class-action suit filed last year
says that underwriters, including Goldman
Sachs, manipulated several IPOs since 1997,
including at least six when Mr. Corzine was
still at the helm of Goldman.