Goldman Sachs ( GS) says it bears no special fondness for hedge fund manager Christopher Flowers, the presumptive buyer of what's left of scandal-sunk Refco ( RFXCQ). 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 ( MWD) 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 ABN-Amro, Banco Santander Central Hispano and 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 ( AIG), Banco Santander and J.P. Morgan Chase ( JPM). 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.
Some lawyers say Goldman Sachs, Bank of America ( BAC) and Credit Suisse First Boston ( CSR), 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.