UNITED STATES - A US pension fund has filed a lawsuit against investment banking giant Goldman Sachs which could act as a test case for investors concerning bonus payments and remuneration to staff.
The Security Police and Fire Professionals of America Retirement Fund is suing Goldman Sachs through the New York Supreme Court for alleged excessive bonus packages as pension fund officials believe the recent $22bn in payouts was in fact public money derived from the US TARP bailout fund.
Lawyers acting for the pension fund, Grant & Eisenhofer, said pension fund officials believe the bonus payouts should not be paid as they are "not based on the hard work of the executives" as "Goldman's board routinely pays out half of its reported annual net revenue as compensation without regard to whether its results were attributable to the productivity and performance of the company's employees".
Instead, the plaintiff argued Goldman Sachs has not met its fiduciary duties as the money raised at the firm in recent months as it has not administered the company's compensation packages "in the best interests of the company and its shareholders".
Goldman Sachs was one of the US banks bailed out with a $10bn TARP loan, but the argument against the investment bank goes further as pension fund officials claimed the revenue Goldman earned this year is largely as a result of taxpayer funds.
More specifically, Goldman generated $29bn in cash in autumn 2008 by issuing debts insured by the Federal Deposit Insurance Company (FDIC), and it then received money from contractual counterparties who had in fact received their assets from the US taxpayer.
One of these key payments was $13bn from AIG which had received taxpayer money in the insurance firm's rescue and then used some of its assets to satisfy "certain financial contracts" with Goldman.
Documents have therefore been filed naming CEO Lloyd Blankfein, COO Gary Cohn and company board members; alleging its 2009 performance was attributable to the US government bailout and not to employee performance.
No further information is available at this time as progress will now depend on the activity of the new York Supreme Court.
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