The strange story of a Goldman Sachs whistleblower who’s taking aim at top execs’ dealmaking

Goldman Sachs bankers walk
down a London street.
Retuers/ Luke
MacGregor

• Christopher Rollins, a 16-year veteran of Goldman
  Sachs, sued the bank this week over his termination.
• Rollins claimed he was unfairly terminated over his
  role in a series of transactions involving an unnamed financier
  who had legal issues in the past. He’s seeking $50 million in
  damages. 
• The lawsuit set tongues wagging on Wall Street and in
  the City of London, given that it names several of Goldman
  Sachs’ most senior staff in London.
• Multiple people familiar with the matter believe the
  financier in question is German entrepreneur Lars Windhorst,
  who’s been referred to as Germany’s
  “modern-day Medici.“
• Mike Sitrick, a spokesman for Windhorst, said in an
  emailed statement that “we strongly deny that the unnamed
  executive mentioned in the lawsuit is Lars.”

This story has everything. 

A lawsuit Thursday sent Wall Street and the City of London
buzzing, including mentions of a whistleblower, an unnamed
“notorious European businessman,” and a handful of Goldman Sachs
bankers, one of whom is a
member of the incoming CEO’s inner circle and others known
internally as the Aussie mafia. 

Christopher Rollins, a managing director and 16-year veteran of
the bank, sued the firm over what he alleges was an unfair
termination over his role in a series of transactions involving a
financier that he didn’t name, according to the suit which seeks
$50 million in damages.

The complaint names Jim Esposito,
promoted this week to co-head Goldman’s securities division,
as a defendant, and details the involvement of Goldman bankers
Michael Daffey and John Storey, and other leaders.

The suit talks about a number of transactions that Goldman
conducted on behalf of the financier, who had legal issues in the
past, according to the complaint.

Multiple people familiar with the matter believe the financier in
question is German entrepreneur Lars Windhorst, though Mike
Sitrick, a spokesman for Windhorst, said in an emailed statement
that “we strongly deny that the unnamed executive mentioned in
the lawsuit is Lars. The allegations in the suit do not support
that supposition.” 

Windhorst, chairman of a firm called Sapinda, is said to be a
protégé of former German Chancellor Helmut Kohl. In the past,
he’s filed for bankruptcy and been involved in numerous legal
battles. In 2012, an article in Financial News
referred to him, approvingly, as Germany’s “modern-day
Medici.”

According to the complaint, the entire affair started when Daffey
and Storey met with the financier in 2015 to explore ways the
firm could bring him on as a client.

The two are among the most senior members in Goldman’s equities
business. The FT reported that Storey
attended the infamous President’s Club dinner in London
earlier this year where the newspaper has reported
that women
servers were groped and propositioned. Daffey was also on the
President’s Club invite list, though the firm has said he didn’t
attend.

Hailing from Australia, they are known by some internally as the
Aussie mafia, according to some people who know them. Michael
DuVally, a Goldman spokesman, declined to comment on the
characterization, and neither exec returned phone calls seeking
comment. 

The complaint alleges the financier told the bankers that he had
$1 billion to invest. Rollins claims that while he had met
the financier socially he’d never sought to do business with
him. 

Here’s what we can ascertain about the timeline of alleged
events, based on the complaint. 

• August 2015: Daffey and Storey allegedly travel to
  Windhorst’s 200-foot yacht in the Mediterranean to pitch for his
  business. Part of the deal would be working with what the
  complaint called an “obscure” brokerage with ties to the
  financier. 
• September 2015 to August 2016: Daffey, Storey and former vice
  chairman Michael Sherwood allegedly “used their influence within
  the firm” to steer a series of transactions around the firm’s
  compliance controls, according to the complaint. 
• The complaint alleges that Goldman: 
  • Issued $1.2 billion of bonds ($700 million in September
    2015, and then $500 million in June 2016) structured by an
    unnamed broker affiliated with the financier, the complaint
    says.
  • Opened an account in New York for the financier. 
  • Opened a second account, in London, to execute a single
    trade worth more than $400 million in July 2016, earning $7
    million in fees. While an internal committee initially
    rejected the trade, it was approved after Daffey appealed to
    Richard Gnodde, a Goldman vice chairman, according to the
    complaint. 
    • Incidentally,
      Reuters reported in July 2016 that Windhorst’s
      firm, Sapinda Group, used Goldman Sachs to help it sell
      a 19% stake in an Austrian real estate firm named Buwog
      for about $400 million. Exhibit 1 of the complaint
      mentions a Buwog transaction. 
  • Goldman also executed a series of trades for securities
    in a second European company that were sold to some of the
    bank’s other clients. 
• August 2016: One of the Goldman clients that agreed to buy a
  stake in the second European company couldn’t come up with the
  money, leaving the bank on the hook for $85 million. 
• September 2016: Goldman compliance execs interview Rollins
  and tell him that he should not have had any contact with the
  financier.
  • Rollins alleges, further, that
    the firm began “a Kafkaesque disciplinary
    process, pressuring Rollins to confess to violating
    compliance restrictions relating to the
    Financier—even though the Firm
    could never identify any actual restrictions.”

He further claims, the complaint
says, that Daffey, co-chief operating officer for the equities
unit, and Storey, co-head of equity sales for the region,
told Rollins they had “arranged” for Esposito to be the
decision-maker and that he would be a “friendly
arbitrator,” according to the complaint. Rollins alleges that
Daffey told Rollins that if he “didn’t fight the charges, and was ‘contrite,’ he’d receive no more than a slap on the
wrist.” Rollins claims in the complaint that he
didn’t do anything wrong. 

DuVally, the Goldman spokesman, said “the suit is without merit and we intend to
vigorously contest it.” 

He added: “As referenced in
a filing the firm made in March 2017, Mr. Rollins executed
certain trades involving a previously restricted party without
obtaining appropriate authorization. As a result, his employment
was terminated.”

That filing is part of Rollins’
employment record, known as a U5, kept by
the Financial Industry Regulatory Authority. Rollins’s
record also includes his rebuttal:
“I
n March,
Goldman Sach & Co filed disclosures information on my U-5
which I believe is inaccurate and plan to contest.”

Get the latest Goldman Sachs stock price here.