On Feb. 28, prime executives at Goldman Sachs staged an “investor day” to reassure shareholders that the financial institution would rebound after a disappointing 2022. Barely an hour after the occasion ended, Goldman’s chief government, David Solomon, boarded one of many firm’s Gulfstream jets en path to the Bahamas.
His vacation spot was the unique Baker’s Bay resort, which contains a world-famous golf course and a deepwater port massive sufficient to accommodate residents’ superyachts. More than a decade earlier, Mr. Solomon had bought a multimillion-dollar beachfront house from the Discovery Land Company, which constructed and managed Baker’s Bay.
Mr. Solomon is not only a Discovery buyer. He’s additionally an element proprietor of the non-public firm and for years has informally suggested its founder — whilst Goldman Sachs vied for work with Discovery.
Many company chief executives, after all, sit on different firms’ boards of administrators, however such exterior commitments are a lot much less widespread within the closely regulated banking business. Regulatory filings by most of Mr. Solomon’s counterparts on Wall Street don’t reveal comparable exterior business actions.
Mr. Solomon’s relationship with Discovery raises questions concerning the potential for conflicts of curiosity and distractions from his day job working an elite Wall Street financial institution.
Tracy Yue Wang, the chairman of the finance division on the University of Minnesota’s Carlson School of Management, stated a battle may come up if Mr. Solomon ever had to decide on between advancing Goldman’s business and nurturing his private funding in Discovery.
“It’s definitely not good corporate governance practice,” she stated.
Stephen Lubben, an skilled in company governance and business ethics at Seton Hall Law School, stated Goldman’s regulators and shareholders would possibly fear about Mr. Solomon turning into distracted. “Running a major financial institution is very much a full-time job,” he stated.
Over the previous two years, Mr. Solomon has used Goldman’s company jet greater than 20 instances to fly to Discovery properties, together with these the place he doesn’t personal properties, in response to flight information reviewed by The New York Times and folks acquainted with Mr. Solomon’s travels.
In a regulatory submitting, Mr. Solomon stated he spends “less than eight hours per year” as a “passive board observer” for Discovery.
Tony Fratto, a Goldman spokesman, stated Mr. Solomon’s funding in Discovery was within the “single-digit millions.” He stated Mr. Solomon has no fiduciary obligations towards Discovery and “is not involved in the business operations” of the corporate.
Mr. Fratto stated there was “no conflict whatsoever” between Mr. Solomon’s job at Goldman and his relationship with and funding in Discovery. “It’s absurd to think he’d guide his decision-making here for such a small personal investment,” he stated. Mr. Fratto stated Mr. Solomon reimburses Goldman when he makes use of its jet for private causes.
Jill Basinger, Discovery’s chief authorized officer, stated that Mr. Solomon was solely a small investor within the firm and that it had by no means completed business with Goldman.
This will not be the primary time questions have surfaced about how Mr. Solomon’s exterior pursuits have an effect on his work at Goldman, for which he has obtained greater than $150 million in compensation since he turned chief government in 2018.
Some financial institution workers have privately grumbled that his passion performing as an digital dance music D.J. is a distraction, particularly with Goldman within the monetary doldrums and shedding 1000’s of workers. On event, Goldman workers have helped handle Mr. Solomon’s D.J. efficiency schedule, The Times beforehand reported.
Mr. Fratto stated the D.J. work was separate from Mr. Solomon’s day job. “I think The New York Times is trying to make this a pattern,” Mr. Fratto stated.
Mr. Solomon has lengthy been buddies with Michael Meldman, the ultrawealthy co-founder (together with actor George Clooney and former mannequin Rande Gerber) of the tequila model Casamigos.
Discovery, which Mr. Meldman based in 1994, builds small complexes of mansions, usually alongside a golf course and out of doors recreation space. They function one thing akin to summer season camp for the wealthy and well-known. They are staffed with sports activities trainers to assist members study actions like kite boarding. Members can golf barefoot or in bathing fits and go to “comfort stations” — miniature sweet shops or replicas of New York delis — between holes.
Mr. Solomon purchased a Baker’s Bay mansion in 2011. Over the years, he and Mr. Meldman turned shut. Mr. Solomon has been a D.J. at Mr. Meldman’s party, at Baker’s Bay New Year’s Eve celebrations and on the opening of Discovery’s non-public seashore membership, Dune Deck, within the Hamptons.
The extra time they spent collectively, the extra concepts Mr. Solomon expressed about how Mr. Meldman ought to run the business, in response to three individuals acquainted with their relationship. “He advises Mike when Mike asks him questions,” Mr. Fratto stated. “Is that unusual? Not at all.”
Mr. Meldman in 2018 invited Mr. Solomon to an occasion on the Four Seasons restaurant in New York with Danilo Medina, then the president of the Dominican Republic. One of the objectives of the dinner was to steer Mr. Medina to construct a brand new airport on the island that will be used solely by Discovery and its members, in response to two individuals acquainted with the dinner.
Mr. Fratto stated Mr. Solomon attended the dinner however didn’t push for the airport, which was by no means constructed. (A consultant of Mr. Medina didn’t reply to a request for remark.)
In 2017, Bryan Slotkin, a managing director at Goldman who regarded Mr. Solomon as a mentor, left the financial institution to hitch Discovery. Once there, he launched a staff of actual property lenders in Goldman’s asset administration division to Discovery workers who have been managing a resort and housing growth in Cabo San Lucas, Mexico, in response to individuals acquainted with the discussions.
While the resort, known as Chileno Bay, was run by Discovery, it was owned by a gaggle of outdoor builders. Those builders had beforehand taken out a $40 million mortgage from one other lender.
Following Mr. Slotkin’s introduction, Goldman purchased after which expanded the mortgage. A Discovery worker and a consultant of the homeowners quickly negotiated with Goldman bankers to refinance it.
The Discovery worker reported to colleagues, together with Mr. Meldman, that Goldman had “accepted some meaningful terms the Borrower requested,” in response to an e mail reviewed by The Times. Describing the progress as “very exciting,” the worker stated Goldman was providing comparatively low charges. Refinancing with Goldman as an alternative of discovering a brand new lender could be cheaper, in response to “every broker or lender we have spoken with in the marketplace,” the worker wrote. The deal went by means of in 2020.
Mr. Solomon was not concerned within the refinancing, Mr. Fratto stated. The Goldman workers in control of the division that made the mortgage knew of Mr. Solomon’s friendship with Mr. Meldman, in response to a former Goldman government.
Another staff of Goldman bankers, in the meantime, met with Discovery executives to pitch them on different providers. Discovery hoped to boost cash by promoting shares of itself to a choose group of outdoor traders. It marked an necessary milestone for the non-public firm, which till then had not provided fairness to outsiders.
To put together for the pitch, Goldman’s staff pored over Discovery’s funds to find out how a lot the corporate was price. They estimated that its worth was considerably beneath $1 billion.
That was lower than Mr. Meldman had hoped. Mr. Solomon personally delivered the disappointing news to his good friend, in response to two individuals acquainted with the dialogue. Goldman didn’t win the project.
Mr. Fratto stated the lower-than-expected valuation confirmed that Goldman was not giving particular remedy to an organization with ties to Mr. Solomon.
In early 2021, Discovery accomplished the non-public fund-raising, with out the assistance of a financial institution. The firm bought $300 million of shares to traders together with Mr. Solomon. Now he was greater than a Discovery adviser — he was additionally a part-owner.
Mr. Fratto stated Mr. Solomon’s funding was authorized by Goldman’s compliance division. He stated Mr. Solomon must recuse himself from any future selections involving Discovery.
Shortly after the fund-raising, Discovery created an advisory board. Mr. Solomon was granted “observer” standing, which means he may attend conferences.
Last September, the group gathered in Beverly Hills, the place Discovery has workplaces. Mr. Fratto stated that was the one assembly Mr. Solomon attended.
Flight information present that, since his funding in Discovery, a Gulfstream jet that’s nearly solely utilized by Mr. Solomon has flown roughly as soon as 1 / 4 to areas just like the Hamptons, the Masters golf match in Augusta, Ga., and Baker’s Bay. Mr. Meldman’s Gulfstream was at these areas on the identical time.
In January, Mr. Solomon spent a weekend at Discovery’s resort in Cabo San Lucas. That Monday, he flew to Los Angeles and watched the school soccer championship recreation from a non-public field alongside a number of Discovery executives and traders, together with Mr. Meldman. Kelley James, a musician who typically performs at Discovery properties, posted a photograph of the group on Instagram.
Mr. Fratto stated the journey and the sport had nothing to do with Discovery.
“This guy spends all his time on Goldman Sachs work,” he stated. “He’s obsessed with Goldman Sachs.”
Matthew Goldstein and Hogla Betiza contributed reporting.
Source: www.nytimes.com