Of all the accusations made by an aggrieved group of REIT investors against Goldman Sachs, perhaps the most surprising is how stingy the bank can be.

A Goldman fund that manages the REIT, formerly known as Equity Inns Inc, requires investors to pay 10 cents per page for print copies of its financial reports. Those reports are not available online, nor are they released publicly — a fact that has led this long-running feud to spill into public view in comment letters to the SEC.

“When I asked for financial reports they said, ‘Can you send a check?,” Art Chandler, an investment advisor at Wedbush Securities, said in an interview. “And I said, I would be glad give you $6 out of the $150,000 in accrued dividends you owe me.”

Another investor, Joseph Sullivan was not allowed to use a personal check or money order. He was required to get a cashier’s check.

Sullivan has been more of a thorn in Goldman’s side. He established 300 trusts, each of which holds some amount of preferred shares in the REIT, now known as W2007 Grace Acquisition. His move could force the REIT to start filing annual 10-K statements to the SEC. As it stands, preferred shareholders who want those statements must not only mail in the 10-cent-per-page fee, but sign a confidentiality agreement.

“By restricting the availability of financial information and preventing the holders of the Securities from communicating financial information about the Securities to third parties, Goldman Sachs has acted to depress investor interest, trading activity and the market value of the Securities,” Sullivan wrote in his comment letter on May 31. “As described above, these actions have taken place at a time that Goldman Sachs was buying the Securities for its own account.”

Letters like Sullivan’s poured in after William Farrar, a Sullivan & Cromwell attorney working for W2007 Grace Acquisition, formally applied for exemption from reporting requirements in an April 4 letter to the SEC. Farrar argued that the REIT only has 280 preferred shareholders if all of Sullivan’s trusts are counted as one holder. He also argues that his client has acted properly and that as a small company with a handful of lightly traded preferred shares, it shouldn’t have to endure the cost and headache of public financial reporting.

The preferred owners are quick to cut holes in this argument. First, they say, W2007 Grace Acquisition can’t possibly be a small company with no employees, as Farrar asserts, since it has $1.6 billion in assets and interests in 130 hotels. They also note that a Goldman affiliate scooped up 35 percent of the outstanding preferred stock from investors who threw in the towel, with the effect of shrinking the shareholder base.

Preferred investors also cry foul on the SEC’s methodology for tallying them up. Because the applicable rule looks at “holders of record” rather than “beneficial owners,” many investors are consolidated into few because their assets are assigned to the brokerage firms where their shares are held. Chandler, for instance, has 40 clients but only 10 are listed as holders because of that definitional quirk.

Technically, Goldman itself does not own W2007 Grace Acquisition or any of the shares; one of its Whitehall real estate funds does. Whitehall Global Real Estate Limited Partnership 2007 bought out Equity Inns’ common stock and assumed debt in a $2.2 billion deal in October 2007. Preferred shareholders were left in a sort of limbo: they were given the right to exchange their holdings into a new preferred stock, which soon stopped paying dividends and lost nearly all of its value as the global financial crisis seized markets the following year.

Goldman itself hasn’t had a great time with its Whitehall funds either. Some made big acquisitions at the top of the real-estate market that in hindsight looked extremely foolish. Its international fund, for instance, dropped to $30 million by 2010 from about $1.8 billion, according to the Financial Times.

But things have turned around for hotel REITs lately, with trusts like Summit Hotel Properties, Host Hotels & Resorts and Ashford Hospitality Trust posting returns of 16 to 81 percent over the past year. As a result, preferred holders of W2007 Grace Acquisition are furious that their shares are trading at just a fraction of their $25 par value and that their dividends have been suspended for the better part of five years, while the Whitehall fund and a separate Goldman loan entity collected fees and exercised an option to acquire 97 percent of the REIT’s assets in exchange for forgiving its debt.

“These monetary payments to GS are very troubling,” Andrew Siegel, managing member of White Bay Capital Management, said in his comment letter. He also noted that “the practical effect of this recapitalization was the issuance of equity of W2007 Grace to Goldman Sachs that would be structurally senior to the Grace Preferred Stock, to bypass public investors.”

A Goldman spokeswoman did not immediately respond to a request for comment on Thursday evening, but told the Wall Street Journal this week that preferred holders should have known about the risks involved with their investment.

The end-game for the preferred holders isn’t entirely clear. Even if they win the SEC battle, they may never get their dividends and exiting their positions would be costly. Some have launched a lawsuit over the deal, which is wending its way through court in Tennessee, but will likely take years to resolve.

As these things tend to go, it may turn out that a big bad bank gets a black eye for beating up the little guy, but was savvy enough not to break any rules.

Wall Street will have a simulated cyber war called Quantum Dawn 2 this month.

Quantum Dawn 2 is coming to Wall Street.

No, it’s not a video game or a bad zombie movie; it’s a simulated cyber attack to prepare banks, brokerages and exchanges for what has become an ever-bigger risk to their earnings and operations.

Organized by the trade group SIFMA, Quantum Dawn 2  will take place on June 28 – a summer Friday that, with any luck, will be a relatively quiet day in the real markets.The drill involves not just big Wall Street firms like Citigroup and Bank of America, but the Department of Homeland Security, the Treasury Department, the Federal Reserve, the Securities and Exchange Commission, according to SIFMA officials.

“We go through a pretty rigorous scenario where we look at multiple threats being thrown out at the U.S. equity markets,” said Karl Schimmeck, vice president of financial services operations at SIFMA.

During the exercise, which runs from 9 a.m. to 2:30 p.m. in New York, participants will receive blasts of vague and confusing information about what appears to be a hacker attack on fake trading and information platforms that are not plugged into actual markets. The participants may see “latency,” or unusual slowness, in trading, or viruses trying to invade the systems. They will also have to call one another to figure out what’s going on.

Then the Quantum Dawn drill will pause to allow executives to make decisions: should they slow down trading? Use different routing mechanisms to exchanges to get orders filled but avoid threats? When the process begins again, it will fast forward in “warp speed” to a new situation later in the day where conditions have worsened or changed.

“Our SIFMA command center at some point will run an escalation process,” said Schimmeck, an ex-Marine. “Our members will say, ‘We think we see a threat out there, this is something multiple firms are dealing with.’ We will facilitate a conference call where we share what we know, have our regulators participate and see if we can understand a threat, deal with a threat and then do a shared analysis so that no one is working on their own.”

It’s a rare situation, he said, in which fierce rivals are not trying to get a competitive edge – they’re trying to help one another survive.

About 40 firms will participate in the operation, having paid fees of $1,000, $5,000 or $10,000 depending on the size of their revenue. Each firm must send three executives: one from business continuity, one from information security, another from operations whose job is to keep trading, settlement and clearance running during market crises. A firm called Cyber Strategies, which works with the Department of Homeland Security on cyber threats, will receive the fees for overseeing the exercise.

As Quantum Dawn 2’s name indicates, this isn’t the first time that Wall Street firms have done this kind of drill. In November 2011, SIFMA organized the first Quantum Dawn, which was perhaps an even more interesting simulation.

“For Quantum Dawn 1, there was a cyber attack coordinated with armed gunmen running around Lower Manhattan, trying to gain entry to the exchanges and really just try to blow things up,” said Schimmeck.

In that operation, participants were all in one central location at a conference table, comparing notes and making decisions as they learned about various threats. In Quantum Dawn 2, they will all be stationed at their own offices, communicating with one another through emails and phone calls as they do in real life. A SIFMA marketing document says this drill will try to instill “greater ‘uncertainty’ and ‘fog of war’ for all players.”

These drills have become more important for Wall Street as financial firms have faced more frequent and sophisticated attacks on their networks.  A couple of months ago, the FBI gave security clearances to dozens of bank executives to inform them about organized attacks against their systems.

Some attacks are evident, like distributed denial of service, or DDoS attacks, that shut down bank web sites or otherwise disrupt their operations. But even more nefarious are hidden bugs that hackers try to install into banks’ proprietary systems without them knowing, said Schimmeck. The hackers then lay in wait for vulnerable moments – like a natural disaster or market disruption – to attack.

One mystery about Quantum Dawn remains: who came up with the name, and what does it mean? Schimmeck, who joined SIFMA from Goldman Sachs after the project’s inception, said he gets asked all the time but has no idea.

Hard to believe, there was a time when Steven A. Cohen was not all that well-known on Wall Street outside of the hedge fund industry. Some even used to confuse the then-paunchy hedge fund trader with a popular magician with the same name.

But it’s true. In fact, a decade ago,  BusinessWeek (pre-Bloomberg takeover) did a cover story about Cohen and his then-$4 billion SAC Capital Advisors, calling  the once super secretive investor, “The most powerful trader on Wall Street you’ve never heard of.”

Today, however, it’s almost a rarity when a major business publication or website (that’s you Dealbreaker) doesn’t have a story about Cohen and his currently $15 billion hedge fund (subject to change depending on how much in outside investor money gets returned at the end of this month). Whether it be the long-running inside trading investigation, his failed attempt to buy the Los Angeles Dodgers, his impressive growing art collection or his sizeable charitable donations, Cohen and his firm are always making news. A few years back, we even did a story on SAC Capital’s resident golf pro and how he would line up golf outings for SAC traders with corporate executives.

But Cohen, for better or worse, has moved beyond the business pages to the popular press. And while he’s not yet fodder for People magazine or TMZ, consider just how mainstream Cohen and his embattled hedge fund empire have gone.

Last month, Vanity Fair did a big piece likening the prosecutorial hunt of Steve Cohen to Captain Ahab and the hunt for Moby Dick. It was a nice read with a great graphic illustration, in which Cohen is the great whale and Manhattan US Attorney Preet Bharara, with spear in hand, plays the part of Ahab. It’s a great image, but one we’ve seen before.  For Vanity Fair, this the second time in three years that Cohen has gotten star treatment. In that earlier story, Cohen tried to show a more warm and cuddly side. And to help further that image, Cohen and his wife Alexandra Cohen sat for a photo shoot with Annie Leibovitz, whose famous for her photo portraits of the rich and famous.

The New York Times has put stories on Cohen and SAC Capital on its front page at least a half-dozen times over the past year as well.

There’s even a twitter stream dedicated to Cohen with the handle, @NotStevieCohen, with the bio description “If I go down, the global economy is coming with me.”

And it would appear Cohen’s stardom is only going to grow with news confirmed by Unstructured Finance that the PBS investigative documentary show Frontline is busily working on a program that will zero in on the federal government’s crackdown on insider trading and particularly the nearly seven-year investigationof Cohen’s firm.

The Frontline report is being produced by Nick Verbitsky, who recently completed a documentary about the collapse of Bear Stearns called Confidence Game, which Verbitsky said he hopes to find a distributor for soon. Verbitsky said he has begun interviewing people for the Frontline report on Cohen but does not yet know when it will air. He said the Frontline team is currently talking about broadcast date for the segment.

As to why Frontline is targeting Cohen, Verbitsky says, insider trading by hedge funds has become “very topical” with the government crackdown and successful prosecutorial record. He adds, “Cohen is becoming more of  pop figure.”

It’s still not clear how this will all shake out with Cohen and SAC Capital: as we pointed out a few days ago this investigation could grind on for years to come.

But one hopes that in doing his Frontline piece, Verbitsky skeds some air time for the ultimate chronicler of all things Cohen and SAC Capital—Dealbreaker’s prolific blogger Bess Levin.

]]> http://blogs.reuters.com/unstructuredfinance/2013/06/12/stevie-cohen-the-pop-star-edition/feed/ 0 0 http://blogs.reuters.com/unstructuredfinance/2013/05/15/nj-governor-chris-christie-spotted-outside-goldman-sachs/ http://blogs.reuters.com/unstructuredfinance/2013/05/15/nj-governor-chris-christie-spotted-outside-goldman-sachs/#comments Wed, 15 May 2013 17:52:46 +0000 Lauren Tara LaCapra http://blogs.reuters.com/unstructuredfinance/?p=1500

New Jersey Governor Chris Christie shakes hands with Lloyd Blankfein lookalike outside Goldman Sachs on Wednesday

Editor’s note: Updated with reason for Christie’s visit.

These days it seems New Jersey Governor Chris Christie is everywhere, from TV talk shows and radio appearances to accompanying Prince Harry on a well-publicized tour of the devastated Jersey Shore. So maybe it’s not too surprising he was spotted outside of Goldman Sachs’s Lower Manhattan office Wednesday morning.

Christie, who filed papers last year to run for re-election in 2014, recently announced that he had gastric bypass surgery to deal with his weight problem and he was looking in good spirits on Wednesday. He had a thick security detail and shook hands with a guy who, from behind, looked like Lloyd Blankfein but turned out not to be. He buttoned his jacket and waved to onlookers on his way into 200 West Street.

Christie has a lot of connections to the Wall Street bank — starting with having beaten its former co-CEO Jon Corzine in the governor’s race in 2009 —but no clear reason to be visiting this week.

Goldman bankers helped Christie get into office that year by offering a cash-flow analysis of the state that formulated his view of the budget, according to a New York Times Magazine report in 2011. Christie’s hard-line on budgetary issues has been controversial  but has made him popular among fiscal hawks and some segment of the voting population.

Perhaps Christie’s closest link to is his brother, Todd, who ran the specialist stock trading firm Spear, Leeds & Kellogg. Goldman acquired the business in 2000, giving Todd a $60 million payout as CEO.

The merger worked out less well for Goldman, as stock trading has become less and less lucrative since that time, due to shrinking margins and high expenses, all mostly related to electronification. (When a reporter mentioned the deal to a senior Goldman executive last year, the exec joked that Goldman’s P&L on Spear, Leeds & Kellogg was nothing to write home about and was a lesson the bank is keeping in mind these days as it looks at the increasingly electronified bond and derivatives markets.)

New Jersey’s first lady, Mary Pat Christie, also worked as an investment banker at the bond trading firm Cantor Fitzgerald, but left after the Sept. 11, 2011 terrorist attacks. Yet Christie himself doesn’t have a lot of Wall Street on his resume – he was a lawyer and prosecutor for most of his career before becoming governor.

But there’s another potential exit strategy for the institutional buyers beyond converting to a REIT or flipping homes earlier than anticipated and that’s becoming a home lender.

In Las Vegas, where the institutional buyers have been quite active the past six months, there’s talk about firms like Blackstone Group eventually providing financing to prospective buyers looking to acquire one of their single family homes. Buyers like Blackstone won’t comment on speculation about their single-family home management subsidiaries becoming defacto mortgage lenders. But it makes sense, especially in the case of Blackstone, which now owns more than 25,000 homes nationwide and says it intends to hold onto the homes and rent them out for several years.

If the institutional buyers are serious about renting out homes as opposed to being fast-money flippers, becoming a source of financing for prospective buyers may be the best way to guarantee there will buyers in the future. The financing could be part of a rent-to-own strategy, or a way to lure potential homeowners who might have difficulty getting a mortgage from a more conventional lender. National home builders long have had their own mortgage operations to help enable first-time buyers to get themselves into a new home.

And if the appetite is right, any loans issued by the national home buyers could be bundled into securities–the next wave of residential mortgage backed securities.

All of this is speculative, but it’s something to consider as the buying frenzy continues in Vegas, Atlanta, Phoenix, Florida and southern California. Maybe there is a purpose to what times simply seems like mad money being thrown at the wreckage of the housing bust.

Darwin theorized that peacocks’ colorful plumage was a sign of        their evolutionary strength.

Wall Street has always been known as a cutthroat kind of place, but lately it seems big investment banks are just mulling around, hoping their competitors die first.

A report on Friday by Goldman Sachs bank analysts said that the industry has entered what they called a state of “reverse Darwinism,” in which banks are betting their long-suffering trading operations can increase revenue not by stealing business from rivals on a competitive basis, but by waiting for rivals to call it quits – leaving their clients with no choice but to move business elsewhere.

The Goldman analysts met with senior executives from Citigroup, Bank of America, Morgan Stanley and Lazard to find out what’s going on in their apparently stagnant capital markets businesses. The executives’ tone was “universally lackluster,” according to the analysts, who predict that investment banking and trading revenues will once again drop about 20 percent this quarter, as they did in the year-ago period. More pain is expected ahead as new derivatives trading rules, higher capital requirements and the long-awaited Volcker rule are implemented.

With that bleak backdrop, everyone is trying to figure out where they can cut costs and what businesses even make sense to stay in anymore. The only way to make money in trading, it seems, is to have such huge market share that enormous volumes can make up for the cost of the operation.

Yet many banks – well, apart from UBS – have been hesitant to pull the trigger on big cost-cutting announcements because it might put them at a competitive disadvantage. No one wants to blink first, because they’re all hoping they can stay in the businesses and outlast rivals. Plus, if there’s one thing that’s certain about trading businesses it’s this: it’s a whole lot easier to tear one down than to build it back up again after realizing the tear-down was a mistake.

“Most banks remain hesitant to announce outsized cost cuts in client facing businesses before peers; their concern being that banks that cut expenses first will see outsized pressure on their revenue,” the Goldman analysts said. “Using history as a guide shows this fear is justified, as historically banks that have cut expenses more than peers have seen outsized pressure on their revenue. This is creating a type of ‘reverse Darwinism,’ where banks are waiting for their competitors to leave certain businesses first, hoping their exit allows for share gains and more expense leverage for the banks that remain committed to the business.”

Arguably it should be easy to see the moves that individual banks have to make just by looking at market share figures in their business lines. Those data are collected by consulting firms like Greenwich Associates and Boston Consulting Group.

Bottom-tier banks at the dregs of the market share chain will have to exit, and top-tier banks will remain and thrive. But what’s harder to tell is whether banks in the middle zone will be able to keep their trading businesses alive. After all, if their weaker rivals die off, it might give them enough business to remain evolutionary.

With market stress at multi-year lows, volatility hedge funds returned just 1.16 percent in the first quarter, compared with 3.7 percent for the broader hedge fund group.

Some of the volatility specialists are doing better than others by capitalizing on major market moves in Japan, for example. And some are doing better simply because they are ‘short’ volatility funds – they tend to perform better when markets are calmer. But those funds are now few and far between.

“If I were to turn the clock back there were a lot more short volatility funds than long in 2004,” said Joshua Thimons, a portfolio manager at PIMCO. “There are fewer now – 2008 wiped most of the face of the map.” Short volatility funds earn a risk premium by selling volatility in the markets, capitalizing on the fact “that some managers use it as tail hedging,” he explained. “These funds have done better this year, but there are fewer of them.”

The problem the long volatility funds face right now– and long vol funds now make up the lion’s share of the strategy – is that, quite simply, there’s not a lot of volatility. Even the short volatility funds require some degree of movement in the market for there to be a relative value opportunity to exploit.

And with central bankers around the world doing their best to make sure markets are stable with monetary and fiscal stimulus aplenty, this low-vol situation may not be fleeting. The Wall Street barometer of investor anxiety, the VIX index, hit a six-year low in March.

Stress-free markets have also impacted a lot of tail risk funds, which attracted a bucket-load of capital after the financial crisis. Investors are backing away after months of poor performance, as Reuters reported earlier in April.

Todd Petzel, the chief investment officer for Offit Capital, which advises on $7 billion for wealthy investors, emailed us on this very issue:

Some hedge funds used to say they could always find cheap options to provide the chance for highly asymmetrical returns patterns.  That hasn’t been true for a while and these funds have been hurt over the last few years by buying relatively expensive insurance against events that haven’t happened. With vols being lower than average now, the cheap insurance thesis may once again be coming into play.  Of course, there are reasons why some insurance policies are dirt cheap – there really isn’t any risk.

Strangely enough, despite calmer markets, the volume of volatility derivatives is at record highs, according to Menachem Brenner, a professor of finance at NYU’s Stern School of Business. Brenner also said that “volatility of volatility is relatively high” at the moment, which creates greater price dislocations in the market, which is a good thing for vol traders.

It also explains why volatility arbitragers aren’t too cynical about the opportunity for returns in coming months. One of those managers is Mike Belbeck, who used to trade derivatives at Credit Suisse and Deutsche Bank (and got his start on Wall Street working for hedge fund billionaire Ken Griffin) and launched a volatility arbitrage fund, Holworthy Capital, in April.

As the vol funds suffer, hedgies who were killed by wild market swings over the past few years are enjoying the spoils of stress-free markets. “The traders have been having their way for quite a while,” said one long/short hedge fund manager. “Finally, the investors are getting theirs. ”

 When you think of Cleveland, finance isn’t the first thing that comes to mind.

 If you’re old enough or a rock-and-roll historian, you might say DJ Alan Freed (and i don’t mean DJ as in electronic dance music).1 Or maybe, the old adage  “mistake by the Lake” comes to mind.

But the Cleveland Fed is breaking some new ground with its new and improved financial stress index. In time, I wouldn’t be surprised if the Cleveland Financial Stress Index becomes a regular go to index for traders–especially macro and volatility types. And it probably won’t be long before someone is modeling some algo to track the CFSI performance if it hasn’t already been done.

The first notable innovation with the Cleveland stress index which previously had been published monthly, is now being updated daily. The daily updates will give economists and traders a better real-time look at what is going on in the financial landscape with risk building up in the system.

It’s worth noting that the better-known St. Louis Fed Financial Stress Index is updated weekly. The Kansas City Fed Financial Stress Index is updated monthly.

Beyond the daily updates, the Cleveland index also now tracks stress in real estate and the securitization markets, along with the other sectors it looks at in the stock, credit and funding markets. It’s the addition of the securitization markets, which is most interesting, given the worldwide search for yield–a byproduct of the Federal Reserve’s easy money policies–is reviving various areas of securitization. The three securitized products markets the index will take the temperature of are: residential mortgage  securities, commercial mortgage securities and asset backed securities (think credit cards, auto loans, student debt). The index tracks the spread between these different classes of securitized notes and U.S. Treasuries.

Tim Bianco, an economic analyst with the Cleveland Fed, in writing about the new and improved index, says the index has fallen in recent months as the economy shows signs of improving. But he said most of the stress in the financial system this year has come from the index’s measurement of the securitization market. Writes Bianco:

The individual components of the CFSI were elevated at the beginning of 2012—though not to the same degree as during the financial crisis—but as the year progressed, stress in many of these markets decreased, indicating that the potential for widespread stress had fallen. So far in 2013, the CFSI’s securitization market component has been contributing the most to the overall level of stress, while the foreign exchange and funding markets have been contributing little.

With Wall Street firms slowly cranking up the securitization machinery, that component of the index should bear some close watching in the coming months.

1) For those still not familiar with Alan Freed, let the Ramones fill you in.

Scanning Goldman Sachs’s newly published interactive annual report on Monday, Unstructured Finance had to do a double-take upon seeing American International Group highlighted as a client success story.

Yes, that’s right. AIG.

Goldman’s site features a 3-minute, 47-second video with two investment bankers, Devanshu Dhyani and Andrea Vittorelli, talking about their work on various AIG deals to help repay the U.S. government.

It also has photos of bankers around the globe who were involved with AIG stock sales, stock buybacks and assets sales, including Chris Cole, co-chairman of investment banking; Yan Liu, Ed Byun Dan Dees and Phyllis Luk, bankers based in Hong Kong; and Michael Tesser and Terence Lim, bankers based in New York.

“The most important aspect of success here was the full repayment of the U.S. government – $182 billion of funds committed to stabilizing AIG at the height of the financial crisis – not only repaid back in a matter of years but repaid back at a profit of $23 billion to the US taxpayer,” says Dhyani. “I think that’s a tremendous achievement for AIG, for people who are involved in this process.”

Jim Millstein, a former Lazard banker who oversaw the government’s stake in AIG at the U.S. Treasury Department until 2011, also contributed a quote to the site.

“At a time when many in D.C. thought the government was going to lose substantial money on AIG, Goldman worked closely with Treasury and the company itself on implementing a restructuring plan that ended up netting billions of dollars in profit for taxpayers,” said Millstein, who now runs his own restructuring firm.

For those who follow bailout sagas, the idea of a Goldman bankers handling AIG’s bailout repayment and being congratulated by a former government official has a certain degree of irony.

One of the biggest scandals coming out of the financial crisis was a $12.9 billion payment AIG made to Goldman Sachs after its bailout in the fall of 2008. The payout was related to credit default swaps that Goldman had purchased from AIG in the years leading up to the crisis, to protect against potential losses on mortgage securities.

As mortgages went belly up in 2007, Goldman began demanding payments from AIG. The two parties had a drawn-out, heated battle about the amount of money Goldman deserved. But when the government took over AIG’s finances, the insurer paid Goldman and more than a dozen other banks 100 cents on the dollar.

Goldman got special scrutiny because it received more than other banks, and because the country was in the midst of a populist backlash against Wall Street. Within four months, Goldman Sachs had become the “vampire squid” – a moniker that stuck – and dozens of conspiracy theories about Goldman being “Government Sachs” took root.

But while critics raked Goldman over the coals for the AIG deal, the investment bank and insurer were already making amends.

In fact, when AIG’s current CEO, Robert Benmosche, took over the reins of the insurer in mid-2009, he fired investment bankers from Blackstone Group who had been advising AIG on its turnaround plan, and re-established the company’s longstanding relationship with Goldman Sachs.

Cole and Millstein spearheaded an effort to develop a new plan to sell off AIG’s assets and repay the government. Last year, AIG completed that plan, having not only repaid the government’s $182 billion in support, but generating a $23 billion profit. (As long as you exclude the incalculable cost of moral hazard.)

But the re-establishment of AIG’s connection with Goldman Sachs has generally been kept quiet until now. It seems that being the taxpayer’s hero via AIG was not the kind of thing Goldman wanted to brag about until all was said and done. Today, Goldman is even promoting its story on Twitter.

“It’s empowering to see the effect it had on the company in getting its message out there to its counterparties, to customers that this company was on its feet again, it was moving towards this new chapter in its life, and it was a watershed moment,” said Dhyani.

A Goldman spokesman was not immediately available to comment on the bank’s decision to highlight AIG as a success story, but we will update when we hear back.

But this week’s escapades involving a former top audit partner at KPMG and his golfing buddy are reminder that the temptation to profit from inside information exists in many industries and professions.

Still, senior hedge fund reporter Svea Herbst-Bayliss reminds us in the following post,  a recent survey found a good portion of people who labor for hedge funds harbor private doubts about the integrity of their colleagues. If the numbers expressed in this survey are anything close to accurate, law enforcement should be busy for quite a while longer.

By Svea Herbst-Bayliss

This week’s insider trading case involving a former KPMG partner has stolen some of the attention from the hedge fund industry. But a survey released this month suggest the regulatory heat won’t be lifting from the industry any time soon.

Half of the respondents in the hedge fund industry survey said they believe their competitors engaged in illegal activity and more than one third said they have felt pressure to break the law or engage in unethical behavior. The poll was  commissioned by law firm Labaton Sucharow LLP, HedgeWorld and the Hedge Fund Association and released earlier this month.

The survey found that  30 percent  of the respondents reported that they had personally observed or had first-hand knowledge of wrongdoing at work.  The survey was released just days before federal agents arrested Michael Steinberg, a portfolio at SAC Capital Advisors, charging him with having traded off illegally obtained information about how technology companies  would report earnings. The U.S. government has spent years investigating how SAC, a $15 billion hedge fund run by Steven A. Cohen, has managed to deliver its double-digit returns for so many years in a row.

The poll shows that 28 percent of the  respondents said they thought their bosses would be unlikely to report misconduct to law enforcement officials if they discovered that a  top performer was using illegally obtained tips and 13 percent of the respondents reported that leaders of their firm would likely ignore the problem.

Yet there is a big caveat with this poll: the sample size. Polling organization ORC International surveyed just 127 people who work in the hedge fund industry. By comparison a fund like SAC Capital employs more than 900 people. And to encourage people to respond  the Hedge Fund Association, which helped commission the poll, promised to send iPod shuffles to 25 randomly selected participants. Some might call that a little bit too much of an incentive.