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Goldman Sachs

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says it bears no special fondness for hedge fund manager Christopher Flowers, the presumptive buyer of what's left of scandal-sunk




It's hard to tell.

Not only did Goldman Sachs help Refco

sell its futures trading and brokerage business to a group of investors led by Flowers this week, but the big investment bank was a financial adviser on another recent acquisition involving its former partner.

In August, Goldman served as co-adviser with

Morgan Stanley


on Flowers' $2.6 billion buyout of NIB Capital, a Dutch-based investment bank, according to Thomson Financial. In the deal, Flowers' hedge fund, J.C. Flowers, led a consortium of investors that included



Banco Santander Central Hispano


Shinsei Bank


It's a cozy relationship given that J.C. Flowers lists Goldman Sachs as an investor in some of the funds it manages, along with ABN Amro,

American International Group

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, Banco Santander and

J.P. Morgan Chase

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The M&A double play involving Goldman and J.C. Flowers could provide ammunition to other prospective buyers seeking to derail J.C. Flowers' $768 million bid for Refco's salvageable parts.

By the end of this week, lawyers for Refco are expected to file a motion with the bankruptcy court seeking approval of the sale to J.C. Flowers. But before that can occur, the bankruptcy court will entertain bids from other suitors prior to a hearing on the motion to sell the futures business to J.C. Flowers.

A phone call to J.C. Flowers' New York office wasn't returned. A Goldman Sachs spokesman declined to comment.

It's not just Goldman Sachs' close ties to J.C. Flowers that irks critics. They say Goldman Sachs should never have gotten involved in the sale negotiations in the first place. Goldman was a lead underwriter on Refco's $583 million IPO in August.

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Some lawyers say Goldman Sachs,

Bank of America

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Credit Suisse First Boston

(CSR) - Get Free Report

, the three investment banks that took Refco public, shoulder blame for not spotting the accounting scandal that brought the firm down. Indeed, it didn't take long for the three banks to be named as defendants in a number of shareholder lawsuits filed in the wake of Refco's collapse.

"I blame the underwriters," says Jacob Zamansky, a lawyer who often represents investors in disputes with securities firms. "Those folks are the alleged gatekeepers."

While Goldman won't discuss its involvement in the Refco sale negotiations, the firm did take some steps to try and quell the accusations that it had a conflict of interest.

Once Refco filed for bankruptcy protection, Goldman Sachs removed itself as an adviser to the company. A person close to the firm says when Refco retained it as an adviser late last week, it was agreed that Goldman Sachs would end its work for the brokerage in the event of a bankruptcy filing.

Indeed, this person says, Goldman Sachs only got involved as a favor to

Thomas H. Lee Partners

, the Boston-based buyout firm that owns a 40% post-IPO stake in Refco and stands to lose hundreds of millions of dollars from the brokerage's collapse.

Goldman Sachs also let it be known that it wasn't getting paid for its work for Refco. A Goldman Sachs spokesman actually referred to the firm's work in the negotiations as being done on a "pro bono" basis.

Goldman's work on the IPO was undertaken on less charitable terms. Collectively, underwriters in the August offering pocketed fees of $40 million, according to Thomson Financial data.