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Goldman’s ‘Muppet Hunt’ Draws a Blank

Goldman Sachs has told its board of directors that an internal investigation found little substance to allegations made by Greg Smith, the disaffected employee who claimed the bank has a "toxic environment" where bankers refer to clients as "muppets."

The review found that weeks before his public resignation — when he railed against Goldman staff who "care only about making money" — Mr. Smith, who worked in derivatives sales, complained about his bonus and said he deserved to be paid more than $1 million, according to people familiar with the matter.

Mr. Smith's book, entitled "Why I Left Goldman Sachs, " is set for publication on Oct. 22 and the bank is braced for more allegations. But the board was told by bank officials that they could not substantiate claims made on March 14 in an open resignation letter published as an article in The New York Times. They recommended no further action be taken.

In his article, Mr. Smith said Goldman was no longer acting in the interests of clients, saying: "It makes me ill how callously people talk about ripping their clients off."

Goldman responded by launching an investigation into what was nicknamed internally "the muppet hunt." The investigators interviewed dozens of staff and sifted through millions of emails, finding about 4, 000 "muppet" references. But they said 99 percent of those referred to last year's movie of the same name.

However, one email sent to Mr. Smith did refer to clients as "muppets." A salesperson wrote: "The muppets don't understand they can trade the futures through a block with other liquidity providers." Goldman executives claim that the language, though disparaging, did not mean the salesperson was attempting to take advantage of clients but to help them understand a trade. It continued: "Can you summarize an email on how it works?"

Mr. Smith's article came after a series of investigations by federal agencies and the U.S. Congress that cast Goldman's culture in a negative light and two years after it set up a business standards committee to emphasise the importance of culture.

A description of his book says Mr. Smith warned nine Goldman partners that he had concerns about the company's culture. Those reviewing the allegations said they found no evidence that he had reported concerns to any senior manager apart from once, two days before his resignation, after he had already written his opinion article.

Two people who managed Mr. Smith said he was a solid performer but did not merit promotion to managing director, a distinction he apparently sought in 2009 and 2010. They also said he reacted badly to his bonus award in January this year.

At the time one of his managers wrote in an email: "Greg Smith off the charts unrealistic, thinks he shld trade at multiples. We told him there's v little tolerance for reactions like that and he needs to tone it down."

Mr. Smith did not respond to phone calls and emails seeking comment. His publisher at Grand Central Publishing declined to comment.

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