Goldman Flap Puts Feds Back in Spotlight

Dirty Secrets

But rather than coming as a shock, the congressional report about Goldman's IPO secrets merely confirms what many have been saying all along about one of Wall Street's more tawdry business practices: Everyone does it to some extent.

Indeed, few thought the practice of doling out hot IPO shares to corporate executives as a way of gaining investment banking work was limited to Citigroup's(C Quote) Salomon Smith Barney.

Yes, Citi's IPO practices have generated the most of the recent headlines. But to some extent, Salomon became an easy target for securities regulators because it allocated so many IPO shares to executives in the telecom industry -- a sector of the market that has imploded and left investors with gaping holes in their stock portfolios.

But the committee report confirms that when it came to spinning and spreading around IPO shares, Goldman was not much better than Salomon and Credit Suisse First Boston. In fact, if the committee hadn't limited its inquiry to those three firms, it's likely that similar IPO abuses would have been found at other Wall Street firms.

"Most of what's disclosed in this report, most veterans on Wall Street have known for years," said Bill Singer, a New York securities lawyer.

For its part, Goldman disputes the findings of the committee's report, calling it "an egregious distortion of facts." A firm spokesman says, "banking clients did not receive favored treatment."

Nonsmoking Guns

And truth be told, there's little in the report to substantiate a claim that there was an actual quid pro quo between Goldman and the corporate executives receiving IPO shares. If anything, the committee report contains a lot fewer smoking guns than the information it released last month about Salomon's IPO allocation practices. It also appears the committee, for whatever reason, chose not to identify all of the executives who got shares from Goldman. A representative in Oxley's office didn't comment.