NEW YORK: Driving across the Sydney Harbor Bridge, the head of Goldman Sachs’s equity-trading business placed a call to his former underling in London to dangle a peace offer.
Michael Daffey, not to mention Goldman Sachs, wanted Chris Rollins to go away. Rollins had been fired for allegedly violating the firm’s financial crimes rules — and he was now accusing his superiors, including Daffey, of scapegoating him in a cover-up of controversial trades involving businessman Lars Windhorst.
“I want this kind of buried,” Daffey said in an April 2017 call meant to broker a settlement. “I don’t want the lawyers to kind of run amok with this Chris, I really don’t.”
The conversation offers a rare window into how Wall Street banks seek to limit embarrassing fallout from disputes — in this case, after stumbling in the pursuit of a lucrative client. It’s a particularly sensitive issue at Goldman Sachs Group Inc., which has been dogged by questions around its controls and standards amid investigations into the bank’s fundraising for Malaysian investment fund 1MDB, which was later looted.
Daffey was tapped by Goldman to personally intervene despite the accusations leveled against him. In a brief chat, the man responsible for helping run the firm’s US$8 billion equity-trading operation repeatedly sought to assure Rollins that he could arrange for immediate delivery of the stock Goldman was withholding from him if the claims against the bank were dropped.
“I’ve told our lawyers to just make an offer,” Daffey said. “I can get that done.”
Bloomberg News was apprised of contents of the call.
The deal that ended Rollins’ career at Goldman was a trade arranged by Windhorst. Rollins says he worked with the bank’s compliance staff on the transaction, but when a counterparty refused to complete it, the firm risked taking losses. He claims Goldman Sachs got rid of him to avoid scrutiny of its internal controls. Last year, he sued the bank.
Goldman has challenged Rollins’s characterization of events and has been seeking to compel his lawsuit into arbitration. The firm’s compliance division investigated his claims and concluded they weren’t valid, said Michael DuVally, a company spokesman. “These complaints were only first raised by Mr. Rollins after his employment had been terminated.”
Goldman’s legal team proposed the April call from Daffey, according to a person familiar with the matter. Both sides consented, said DuVally, calling such conversations “a common practice in employment disagreements.” A proposed settlement wouldn’t have prevented Rollins from also talking to regulators or the bank’s own “escalation channels,” he said. Rollins declined to comment.
Daffey also made separate approaches to Rollins through mutual acquaintances, according to the person and messages seen by Bloomberg. Goldman declined to comment on whether it sanctioned that effort.
Daffey, 52, helps run the stock-trading group that ranks as Goldman’s biggest revenue generator over the past five years. Since his co-head Paul Russo left the firm last year, Daffey and three other executives have co-led the business.
The Aussie joined Goldman in 1994 from a brokerage in Sydney, and today he’s a member of the bank’s management committee, its highest decision-making body. Within Goldman, Daffey is known for his partying with colleagues and clients and for his highly envied relationships with hedge-fund titans whose business can prove lucrative.
Windhorst, a controversial German financier, socialized with Daffey and Rollins. Once a teen investing prodigy, by his late 30s he was looking to rebuild his empire after business failures. Having scared off some lenders with a history that included filing for personal bankruptcy and the later collapse of another of his investment firms, by 2015 he was back courting Wall Street banks in an effort to do deals.
That year, Daffey and another senior equities executive joined Windhorst with their spouses on a luxury yacht docked in the Mediterranean. Rollins also went on trips arranged by Windhorst, including to Ibiza and a Formula One grand prix event, people with knowledge of the matter said.
At a birthday celebration in October 2015, Windhorst and his girlfriend gave jewelry to Daffey’s wife, according to people familiar with the matter. Accepting such a gift from a potential client can violate internal policies.
“Mr Daffey did not become aware of the source of the gift until much later,” the Goldman spokesman said. “When it was brought to his attention, it was addressed internally and determined that the gift did not act as an inducement.”
Daffey told some people at the bank that he gave the jewelry to a maid, a person with knowledge of the matter said. Windhorst confirmed a gift.
In his lawsuit, Rollins said Daffey helped persuade an internal committee to allow a block trade for Windhorst in July 2016 that quickly generated millions of dollars in fees. Goldman has said that was a one-off trade and its compliance group remained opposed to any further business dealings with firms tied to the financier.
It was a later trade that led to Rollins’s termination.
Even though the bank barred trades directly with Windhorst, Rollins pursued a deal where the financier was essentially a matchmaker, offering to hook him up with buyers and sellers. Rollins said compliance staff let Windhorst make the introductions, but that when a counterparty reneged on making almost US$85 million in payments, senior executives panicked and blamed him.
A pair of internal reports filed with his lawsuit show Rollins contested his November 2016 dismissal with Goldman’s top lawyers, including its general counsel, and blamed Daffey and other executives for cultivating business with Windhorst. Rollins offered to take a polygraph test with Daffey and others who had ties to the financier.
In particular, Rollins has pointed to a July 2016 meeting where Daffey and other senior Goldman executives gathered at Windhorst’s London office. They allegedly discussed plans for future deals, and celebrated the block trade.
The German businessman confirmed this account of the evening, including discussions about conducting more business together with Daffey and other Goldman executives.
The men at the gathering congratulated themselves for having done proper due diligence and getting compliance approval, according to a person with knowledge of the gathering.
Then they spoke about the recent negative headlines that had shown the bank in poor light at the time — such as transactions with Libya and the 1MDB dealings in Malaysia.