Under fire in probe, Goldman make move

Goldman Sachs on Capitol Hill hot seat
Goldman Sachs on Capitol Hill hot seat   

At a combative Capitol Hill hearing Thursday over its commodity investing and trading, a Goldman Sachs executive said the firm is in talks with a Russian buyer, among others, about selling its embattled metal warehousing business.

During the hearing, where a feisty Sen. Carl Levin grilled Goldman's higher-ups over allegations they manipulated metal investment rules for profit, hurting aluminum purchasers, the head of Goldman's commodity investment group, Jacques Gabillon, said the firm was in discussions with foreign investors—including at least one in Russia—about potentially selling Metro, its metal warehousing subsidiary.

"We are running a sales process right now and we have a variety of interest from companies in Europe, in Russia and in China," Gabillon said during the question-and-answer portion of the hearing.

The remarks are significant because other transactions between U.S. and Russian companies have been thrown into question amid powerful U.S. and EU sanctions against the country since its annexation of a portion of Ukraine earlier this year.

Jacques Gabillon, head of the global commodities principal investments group at Goldman Sachs looks on as Christopher Wibbelman, president and CEO of Metro International Trade Services, speaks during a Senate hearing on Capitol Hill in Washington, Nov. 20, 2014.
Andrew Harrer | Bloomberg | Getty Images
Jacques Gabillon, head of the global commodities principal investments group at Goldman Sachs looks on as Christopher Wibbelman, president and CEO of Metro International Trade Services, speaks during a Senate hearing on Capitol Hill in Washington, Nov. 20, 2014.

Morgan Stanley, for instance, may be stymied in its attempt to sell oil assets to Rosneft, the huge Russian oil company, if a U.S. review panel doesn't approve it by the end of the year—an OK that seems questionable given the recent sanctioning of both Rosneft and its chief executive, Igor Sechin.

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Goldman's Metro unit has been for sale since at least May. Earlier this week, a person familiar with the matter said that the number of possible acquirers was in the single digits, but that no deal was imminent.

Meanwhile, Metro's operations are under fire by Levin and his influential Permanent Subcommittee on Investigations, which in a 400-page report chastised Goldman for flouting regulations and effectively manipulating metal prices in the U.S.

"Goldman has the ability to manipulate the LME price by manipulating the Midwest premium, and then to make trades taking advantage of that manipulation," said Levin on Thursday morning. "Goldman's ability to influence any portion of the price for a key component of the industrial economy is simply unacceptable."

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Although the price of aluminum on the benchmark London Metal Exchange market has sunk in recent years, the price of aluminum delivery in the U.S., as measured by the Midwest Premium market, has risen to an all-time high of 23.5 cents per pound this month, potentially influenced by long waits for getting metal out of storage at facilities like Metro.

In prepared testimony, Metro's chief executive officer defended his company's actions, saying it plays by the rules and contributes jobs to the Detroit area, according to Reuters. Chris Wibbelman said only a small percentage of aluminum stockpiles are subject to the kind of metal backlogs that have come under scrutiny.