The Wolves of Wall Street

At yesterday’s management meeting we all found that our bonuses were waiting for us and we were also treated to some of the facts regarding the much talked about Goldman Sachs fiasco which resulted in the $46 million loss in the Profit Sharing Plan. Before the meeting we all had a basic outline of what happened: the plan lost all that money in the financial collapse of ’08; Arthur T made sure that the participants of the plan were made whole by taking $46m from the profits and putting it back into the plan; Arthur S threw a tantrum about losing some pocket change; Trustees of the plan, William Marsden and Harold Sullivan were fired as a result by the new Board of Directors. Somewhere in the midst of all that a suit was filed against Goldman Sachs looking to recover the funds.

Arthur took to the podium and told us that we should know some of the particulars in this story. It began back in ’07 when some funds had become available for investment so a meeting was called with the Plan’s longtime advisers from Goldman Sachs to strategize how the funds should be allocated. Three men who had gained the confidence of the trustees over 20+ years had the perfect place for the money: Fannie Mae and Freddie Mac. A new offering of preferred stock was ready to come to the market and would provide an extremely safe position with practically a guaranteed steady return. These were quasi-government agencies and as such, would not, could not fail.

The Plan has always been ultra conservative with its investments; too many peoples’ retirements are dependent on it and thus it has always invested with the goal of being steady. Bull markets have been missed but so too have the Bear markets. Its performance over the years has ensured that thousands of associates have been able to retire with a very attractive nest egg waiting for them. As usual, the trustees asked all the right questions of the Goldman Sachs team and asked them often and over a period of time. They made sure all due diligence was done. First and foremost among their concerns was how much exposure to subprime loans the funds might have. They were assured, on several occasions, that exposure on this front was minimal. Fannie and Freddie dealt with traditional mortgages and steered clear of the shaky non-conforming loans. The vetting process went on and the answers kept coming back: Fannie and Freddie were the right choice for the trustees and fell in line with the ultra conservative strategies that the Plan had always implemented.

Lots of salespeople walk through the doors at 875 East Street and very few gain the trust of the buyers. These three trusted advisers were about to prove that they were nothing better than snake oil salesmen.

At the same time Goldman Sachs had their people gathering buyers for these stocks, the company was SHORTING THE REAL ESTATE MARKET! In effect, they were selling investors on the safety of government backed mortgages while putting their own money on that same sector failing. This is Goldman Sachs we’re talking about, one of the most powerful brokerage houses in the land. What they did was sinful at best. Over time, as the facts unfolded and the scene played out, the trustees would learn that Fannie and Freddie in fact had far greater exposure to subprime mortgages than they had been led to believe.

After getting nowhere with Goldman Sachs in an effort to have this wrong righted, the Plan decided to sue the firm.

At this point, Arthur handed the podium over attorney Chris Sullivan, whose firm took on the case. Mr. Sullivan spoke of how he has never seen a team more tenacious and determined to get justice than the Trustees were in this case. Detailed notes existed for every conversation from every meeting and phone call. We can only imagine that these records would prove invaluable through the case.

Mr. Sullivan concluded that a “mutually agreeable” settlement was reached between the trustees and Goldman Sachs.

Imagine that, a victory in the courtroom! David slays Goliath. After all of the disheartening results that have come our way in various courtrooms, it is nice to be on the winning side of things. While the term “mutually agreeable” is a bit ambiguous, we are talking about Goldman Sachs here. Goldman Sachs is an enormous company which holds great influence in many parts of our economy; they are very familiar with things going their way. “Mutually agreeable” is not a term these Wolves of Wall Street are used to hearing.

Now let’s look at the Board’s actions while this suit was ongoing. In a posting on their website dated November 25, 2013 (since removed) the Board wrote “In an effort to further reward associates, the Board has begun a process for selecting nationally recognized investment advisers to professionally manage the funds in the profit sharing plan and ensure a conservative, yet better return (while avoiding the mistakes made by the prior plan Trustees that required a $46 million “bailout” from the Company for a bad business decision).” Despite all of the facts surrounding the case, they decided that the blame for the monetary loss was squarely to be placed on the shoulders of the Trustees, Bill Marsden and Harold Sullivan, and fired them. How bad does that make the company look in the eyes of the court? Worse, what type of ammo does it give Goldman Sachs when it shows that we are a house divided with our Board and the shareholders they represent blaming their own trustees? They also state that they are going to do exactly what got us into the mess in the first place by hiring “nationally recognized investment advisers”. Goldman Sachs, perhaps? After being burned by trusted advisers, who we need to look after the investments to ensure a steady return are people like Bill Marsden, Harold Sullivan and Arthur T. Demoulas who ALWAYS have our interests first and foremost.

There are many similarities in this story to the story that we are living day to day in our battle to keep Arthur T as our leader and this company as it is, but this one is most glaring:  Arthur T. Demoulas, Bill Marsden and Harold Sullivan were unwavering in their belief that they were on the side of what is right. Their dogged determination and tenacious fighting spirit drove them for almost six years to see this fight through. There was no thought of giving up, no matter how big and powerful their opponent might have been. They remembered the lesson that David taught us: when you are on the side of what is right and just and you have the will to win, nothing can stop you if you are unrelenting in your desire to see it through.  As our battle with the Wolves of Market Basket churns on, let’s keep that same fighting spirit strong in each of us.

 

 

 

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