NEW YORK -- Goldman Sachs Group Inc. is fighting to clear its name, but not in a court of law.
Goldman has hit back hard against civil fraud charges with a public relations blitz aimed at poking holes in the Securities and Exchange Commission's case and repairing the bank's reputation. Every time the SEC has punched, Goldman has quickly counterpunched.
Public relations consultants say it's too early to know if the strategy is working for Wall Street's most powerful bank. Some big Goldman clients are publicly backing the firm, yet its stock has yet to recover from the double-digit nosedive that followed the SEC lawsuit on April 16.
To help its cause, Goldman has hired Mark Fabiani, a big player in the PR world with strong ties to top Democrats. Fabiani earned the nickname "Master of Disaster" for his handling of crises during the Clinton administration. He now works as a media consultant specializing in corporate crisis management. Goldman also has brought in top corporate attorneys. And its executives, including Chief Executive Officer Lloyd Blankfein, have been out in public, not hunkering down.
The damage control efforts will be on display today when Blankfein and Fabrice Tourre, the employee named in the SEC fraud charges, are questioned by a Senate subcommittee probing the bank's role in the financial crisis.
Goldman's PR campaign, which runs counter to its long history of secrecy, is a bold yet risky move. Some analysts say a poor performance on Capitol Hill today could worsen the bank's image problems and make it harder for it to attract and retain lucrative clients. If the strategy fails, analysts say, it could cost Blankfein and other Goldman executives their jobs.
But the company got a boost last week when several big clients, including the investment firm Blackstone Group and Ford Motor Co., said they're sticking by the bank. More support came from Warren Buffett, whose company, Berkshire
Hathaway, has a big Goldman stake. Berkshire Hathaway has said Buffett isn't concerned about his investment in the bank.
Blankfein and Tourre were both at Goldman's headquarters in New York over the weekend preparing for today's hearing, according to a person with knowledge of the matter. Tourre on Saturday also met with investigators for the Senate panel during an hours-long interview, according to the person, who requested anonymity because the talks were confidential.
In prepared testimony released by Goldman on Monday, Blankfein repeated the bank's intention that it had done nothing wrong when it sold risky securities to two investors who lost hundreds of millions of dollars.
But the CEO acknowledged, "We have to do a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky."
A careful strategy is critical to Goldman given the forces lining up against the bank. They include the SEC and congressional Democrats who are using the case to push for a regulatory overhaul of the financial services industry. Investors, meanwhile, have started filing suit against Goldman because of the 13 percent drop in the company's stock after the SEC lawsuit was announced.
But Goldman has its own army.
"Goldman is a very wealthy firm, and they're bringing tens of millions of dollars in resources to this fight," said Thomas Ajamie, a Houston-based defense lawyer who specializes in financial fraud cases but who isn't working for Goldman. "They have hired very skilled lawyers, lobbyists and public relations people. They appear to be getting their story out."
Top financial law firm Sullivan & Cromwell LLP is heading Goldman's defense. The lead lawyer is Richard Klapper, who represented Barclays Capital when Enron shareholders sued the investment firm in 2007. Goldman also has hired Gibson, Dunn & Crutcher, the law firm of former U.S. Solicitor General Theodore Olson, and K. Lee Blalack, a partner in the Washington-based law firm O'Melveny. Rounding out the team is Greg Craig, the former chief counsel under President Barack Obama.
None of the law firms responded to requests for comment.