Stocks fell and commentators fumed at reports yesterday that Goldman Sachs executive Lloyd Blankfein has retained Washington defense lawyer Reid Weingarten in the middle of a Justice Department probe of the organization and its role in the recent financial crisis.
But Peter J. Henning, a law professor at Wayne State University specializing in criminal law, said reporters and investors overreacted to the news, adding that the decision for executives to “lawyer up” with big names has become routine in the world of white-collar defense.
“It doesn’t say anything about the investigation more than what we already knew, which is that the Justice Department is going to look at the Senate report,” Henning said. “When a company and individuals have been named, everybody goes and gets a lawyer.”
Blankfein, who has worked for six years at the top of the nation’s largest investment bank, was sharply criticized in a report put out by the Senate Permanent Subcommittee on Investigations in April. The report questioned inconsistencies between the Blankfein’s testimony and that of other Goldman executives, and Chairman Sen. Carl Levin (D-Mich.) accused Blankfein of lying under oath. He said the issue was then in DOJ’s hands.
Blankfein does not currently face any charges, and it’s still unclear how investigators will handle the report.
The Securities and Exchange Commission may also be investigating Goldman after it settled a fruad lawsuit against the company for $550 million in July 2010.
Weingarten, a former trial attorney in the DOJ’s Public Integrity Section, has cultivated a stellar reputation by representing high-profile clients in defense cases like film director Roman Polanski, GlaxoSmithKline attorney Lauren Stevens and former agriculture secretary Mike Espy.
News of his retainer prompted Goldman stocks to finish down 4.7 percent yesterday at their lowest level since May 2009, according to Reuters.
But the decision to tap well known – and no doubt expensive – attorneys like Weingarten doesn’t surprise Henning, he said, because Goldman is required to pay for the legal representation of its executives. And with corporate money paying the legal bills, Blankfein can afford to hire a team of attorneys who will go toe-to-toe with the department, he added.
“When you have a large legal team and a very deep-pocketed legal team on the other side, the Justice Department and SEC realize that and have to be very careful,” he said. “A lot of the time, the government can out-resource someone, but I don’t think they can out-resource Goldman.”
As for what’s next, Henning said he expects investigators to be conducting interviews behind the scenes, but judging the extent of any potential case will have to wait for grand jury subpoenas – if and when they come.
“This is the biggest development in the case since the referral, so really not much has happened,” he said. “”If [Blankfein] was interviewed [by investigators], that would be interesting but still very preliminary.”
