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Warren Attacks Goldman’s Proposed DOL Retirement Plan Waiver (2)

April 13, 2021, 5:20 PM; Updated: April 13, 2021, 8:42 PM

Sens. Elizabeth Warren (D-Mass.) and Tina Smith (D-Minn.) are calling on the U.S. Labor Department to withdraw a preliminary waiver issued late in the Trump administration that would allow Goldman Sachs to continue managing retirement assets despite a subsidiary’s criminal conviction.

DOL’s Employee Benefits Security Administration proposed Dec. 31 to give the financial behemoth a five-year exemption tied to a Malaysia affiliate’s guilty plea in a global bribery scheme. If finalized, this waiver would essentially let Goldman escape disruption to its 401(k) and pension investment practices as a consequence of that crime.

“Companies that are convicted of or plead guilty to fraudulent schemes do not deserve special government favors,” the lawmakers wrote Tuesday to EBSA’s Deputy Assistant Secretary Timothy Hauser.

The department has yet to finalize that exemption, a status called a Qualified Professional Asset Manager, in a process that’s already caused a three-month delay in a federal judge’s sentencing hearing for Goldman Malaysia.

It’s unclear if new political appointees at President Joe Biden’s DOL would have a different interpretation of whether Goldman still qualifies for the waiver. The proposed exemption was issued under the leadership of Trump-appointed acting EBSA head Jeanne Klinefelter Wilson. Biden has since installed new political staffers at EBSA, but the subagency awaits a Biden nominee for a permanent new leader, which would then require Senate confirmation.

The agency reversed course in March on a Trump-era legal opinion that allowed banks to maintain these retirement plan waivers when convicted under foreign laws. Goldman Malaysia pleaded guilty under U.S. law.

DOL spokesman Michael Trupo confirmed the agency had received the letter, but the department didn’t address questions about the senators’ concerns. Goldman Sachs declined to comment through a spokesman.

Goldman originally sought a 10-year relief period in an exemption application filed Oct. 15 under a requirement in the 1974 Employee Retirement Income Security Act for financial institutions facing felony convictions.

But “given the magnitude, gravity, duration and pervasiveness” of the Malaysia affiliate’s misconduct and the parent company’s numerous “compliance control failures,” a five-year term would be more appropriate, EBSA countered in the proposed exemption.

Such a distinction between five years and 10 years is “illogical and absurd,” Warren and Smith wrote, “because the net effect is the same: a corporate criminal will be allowed to continue its lucrative business managing workers’ and consumers’ retirement funds.”

The plea deal reached with the U.S. government holds Goldman’s subsidiary responsible for raising billions for a state investment fund intended to support Malaysian citizens. Much of the fund was stolen by people tied to the former prime minister and spent on high-end art, real estate, and financing for the film “The Wolf of Wall Street.”

“The Department of Labor exists to protect American workers and their retirement savings from greed, corruption, and mismanagement,” Warren and Smith stated in their letter. “Exempting corporations from consequences for misconduct and allowing Wall Street’s most powerful bad actors to continue business as usual flies in the face of that obligation to the public.”

(Updated with Labor Department comment in seventh paragraph. )

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

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