Ask me no questions, I'll tell you no lies

Greenmail: Money paid by a company (or allied company or individual) to acquire its own shares of stock from a shareholder who is threatening to take control of, or unwanted influence over, the company. The term is a neologism combining the terms greenback and blackmail, invented by journalists and commentators who saw the practices of corporate raiders as a form of blackmail. The target company is financially held hostage, and is legally forced to pay the greenmailer to go away.

Jonathon Weil makes some interesting observations about a recent unsolicited payment from Goldman Sachs to the Commonwealth of Massachusetts:

Goldman Sachs Pays Greenmail to make Snoops Go Away


May 14 (Bloomberg) -- Thanks to the commonwealth of Massachusetts, crusading attorneys general throughout the land now have a road map for extracting multimillion-dollar checks from Wall Street banks such as Goldman Sachs Group Inc.: Don’t accuse them of anything at all.

The big news from Goldman and Massachusetts Attorney General Martha Coakley this week was a $60 million settlement, under which the investment bank resolved her office’s investigation into its packaging of mortgage securities backed by subprime home loans. Per the usual custom in such accords, Goldman didn’t admit any wrongdoing.

The odd part is that Coakley’s office didn’t accuse Goldman of any wrongdoing, either. It filed no lawsuit. And it made no allegations that Goldman had violated any statutes or rules.

Why did Goldman pay if Coakley’s investigators couldn’t identify any infractions to allege? That’s a mystery. The only statement I could squeeze out of Goldman was a one-liner from a P.R. man, Michael DuVally. “Goldman Sachs is pleased to have resolved this matter,” he said. I’ll bet it is.

Odd behavior from an investment bank--sorry, holding company-- not exactly known for spending money frivolously.

When I first read through the settlement agreement, which contained no findings of fact, I couldn’t help but wonder if this might be one of those instances where a prospective plaintiff agrees to take a payoff in exchange for keeping silent about any damaging information it knows.

You Have to Wonder

Coakley said it was a fair question. She assured me, though, that this wasn’t the case. “There was no smoking gun here,” Coakley said. She said Goldman’s $60 million offer was everything her office could have hoped for, especially given its limited budget and jurisdiction over the bank’s activities. Even if the state had filed claims against Goldman, “we would not be able to achieve a better result,” Coakley said.

That may be true. It’s also conceivable that Goldman had no legal liability, and decided to pay the equivalent of a parking ticket just so it could get the investigation over with and stop racking up bills for outside lawyers.

Yet there’s the inescapable feeling that we have no idea what really happened here. Those 714 borrowers may be getting compensation. What much of the public is looking for, though, are answers about how some of the nation’s most powerful Wall Street banks helped drive us into our present economic mess.

We didn’t get any this time. Perhaps that’s one reason Goldman is so pleased with this investigation’s resolution.