Goldman Sachs was sued on Thursday by an Illinois pension fund seeking to recover billions of dollars of bonuses and other compensation being awarded for 2009, saying the payouts harm shareholders.
In a lawsuit filed in New York state supreme court in Manhattan on behalf of shareholders, the Central Laborers' Pension Fund said Goldman had by Sept. 25 set aside nearly $17 billion for compensation and might pay out more than $22 billion for the year. It said this "highlights the complete breakdown" of corporate oversight.
The lawsuit contends that Goldman's revenue for the year was artificially inflated by government bailouts of the banking industry and the insurer American International Group, as well as a change in Goldman's fiscal year.
Such sums, and Goldman's practice of continuing to pay out nearly 50 percent of net revenue as compensation, show "scant regard" for the interests of shareholders, it said.
Goldman spokesman Michael DuVally called the lawsuit "completely without merit." Other defendants are Chairman and Chief Executive Lloyd Blankfein, Chief Operating Officer Gary Cohn, Vice Chairman J. Michael Evans, Chief Financial Officer David Viniar, and 10 directors.
An individual shareholder, Ken Brown, filed a similar lawsuit in the same court on Tuesday.
Goldman has in recent months been faulted by banking critics who say it is one of the biggest beneficiaries of government efforts to shore up a financial system that seized up in September 2008, and who consider its pay awards outsized.
The bank repaid its $10 billion of bailout money last year, and thus is no longer subject to related curbs on pay.
Concern about financial industry pay generally is expected to rise over the next few months as companies release their proxy statements and hold annual meetings.
Other unions have also criticized Goldman conduct. Last month, the International Brotherhood of Teamsters had accused Goldman of making derivatives trades that would benefit from a bankruptcy by trucking company YRC Worldwide.
In its lawsuit, the Illinois fund is seeking damages sustained by shareholders, restitution from executive officer defendants, corporate governance changes and other remedies.
Goldman Sachs shares doubled in 2009 and have risen more than 5 percent in 2010, but are 29 percent below their record high set in October 2007. They closed Thursday up $3.41, or 2 percent, at $177.67 on the New York Stock Exchange.
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