Goldman Trader Claims Kafkaesque Firing Over `Notorious' Client
(Bloomberg) -- A former Goldman Sachs Group Inc. executive claims in a lawsuit that the bank retaliated against him for blowing the whistle on its failure to comply with anti-money-laundering policies.
Christopher Rollins, who worked for Goldman Sachs for 16 years and rose to be a managing director, claims the firm’s leaders smeared his reputation, falsely blamed him for its anti-money-laundering failures and eventually fired him in February 2017. He’s seeking at least $50 million in compensatory damages and punitive damages.
Goldman Sachs denies any wrongdoing and says it’ll fight the lawsuit, which was filed Thursday in Manhattan federal court.
Rollins’s story begins in August 2015, when two Goldman Sachs senior bankers, Michael Daffey and John Storey, allegedly met with a financier on board his 200-foot superyacht in the Mediterranean Sea. The financier, who’s not identified by name in the complaint, also had a jet and said he had more than $1 billion to invest, according to Rollins.
The investor was a "notorious European businessman" who had a history of legal problems, Rollins said in the complaint. The businessman was Lars Windhorst, a German financier who overhauled his main investment vehicle that faced a liquidity crunch in 2016, according to people briefed on the matter.
Alistair Kellie, a spokesman for Windhorst, said the German businessman isn’t the financier in the lawsuit.
“We strongly deny that the unnamed executive mentioned in the lawsuit is Lars Windhorst,” Kellie said in a statement. “The allegations in the suit do not support that supposition.”
The Goldman Sachs senior bankers and former vice chairman Michael Sherwood knew the businessman and were sympathetic to him, Rollins said in the lawsuit. So, they used their influence to steer a series of transactions past the company’s anti-money-laundering controls, according to the lawsuit.
For example, a month after the August meeting aboard the yacht, Goldman Sachs agreed to issue $700 million in bonds with the financier’s broker, earning millions of dollars in fees, Rollins said. Anoa Capital, a brokerage in which Windhorst’s Sapinda investment vehicle had a stake, helped structure a $700 million bond deal with Goldman Sachs in September 2015, the Financial Times reported last year, noting that Windhorst has a 68-meter (223-foot) yacht. Sherwood was aware of the unnamed businessman’s stake in the broker and approved the deal, according to the lawsuit.
“Sapinda, Mr. Windhorst’s company, was only ever involved in one very successful July 2016 transaction with Goldman Sachs, which was widely publicized and did go through and receive all necessary approvals including those by compliance and legal,” Kellie said. “There were no other transactions or business dealings between Goldman Sachs and/or Sapinda besides this one July 2016 transaction.”
The firm also opened an official client account in New York for an offshore fund that the businessman controlled, and completed a $400 million block trade for his fund in July 2016, earning about $7 million in fees, according to the lawsuit. Windhorst’s Sapinda moved to sell a 19 percent stake in an Austrian real-estate firm worth about $400 million with the help of Goldman Sachs, according to a Reuters report in July 2016.
“Daffey and Sherwood were ecstatic and Sherwood personally called Rollins to thank him,” according to the complaint.
Rollins says that while he met the financier socially he never sought a business relationship with him. He said when the financier called him about a potential deal, he complied with Goldman Sachs’s protocols and reported it to his superiors.
Rollins claims Goldman Sachs "whitewashed" the business from its records, leaving the impression that he had been the sole source of the firm’s business with the financier, whom the firm had come to consider a "toxic regulatory risk."
The bank blamed him when one of its clients didn’t pay for a trade the financier introduced, leaving Goldman Sachs temporarily on the hook for $85 million, according to the complaint. Goldman Sachs came to believe the settlement failure was the result of a series of side-deals the financier made with other parties. Compliance officers “leapt to a conclusion” that Rollins was involved because the financier called him shortly before the trade, according to the complaint.
He says he was suspended as a result.
Rollins said he "refused to be scapegoated" and in late October 2016, Goldman Sachs "commenced a Kafkaesque disciplinary process," that included pressuring him to confess to violating compliance restrictions relating to the financier -- “even though the firm could never identify any actual restrictions,” according to his lawsuit.
After a disciplinary hearing chaired by James Esposito, the co-head of Goldman Sachs’s trading division, Rollins said he was fired in February 2017 for having breached the alleged compliance restrictions involving the financier. Rollins is also suing Esposito.
“As referenced in a filing the firm made in March 2017, Mr. Rollins executed certain trades involving a previously restricted party without obtaining appropriate authorization,” Michael DuVally, a spokesman for Goldman Sachs, said in an emailed statement. “As a result, his employment was terminated.”
DuVally declined to comment on behalf of Esposito, Daffey and Storey. Sherwood didn’t immediately respond to a message seeking comment.
Rollins says he later reported "massive compliance failures" and potential violations of U.S. law to the firm’s U.S. and U.K. legal departments, as well as the use of what he calls a "sham investigation" to cover it up.
Rather than investigate his claims, Rollins says Goldman Sachs further retaliated by providing "false and damaging information about him to regulators,” and defaming him to prospective employers. Goldman Sachs also canceled millions of dollars in equity awards, he said.
Rollins, who joined Goldman Sachs as a sales trader after graduating from Harvard in 2000, says he was one of the company’s top three producers in the securities business. He worked with Ralston Roberts as co-head of European execution services until he was fired.
In March, Rollins was chosen to be the chief executive officer of BTIG LLC’s European unit, which specializes in high-touch broking, the business of arranging equity deals with human involvement.
The suit is Rollins v. Goldman Sachs Group Inc., 18-cv-7162, U.S. District Court for the Southern District of New York (Manhattan).
©2018 Bloomberg L.P.