Meg Whitman is trying – and succeeding – in buying the California Governor’s race, and Jerry Brown’s nascent and moribund campaign hasn’t yet fgured out a narrative that would defuse the eMeg juggernaut. But there certainly is one lying around.

In addition to being the CEO for eBay, Whitman sat on the Board of Directors of Goldman Sachs in 2001 and 2002. You could not draw up a more damaging corporate connection right now than to the “vampire squid” that is Goldman Sachs. But there’s more to the story than just a seat on the board, for a variety of reasons. First, RJ Eskow explains Whitman’s shady actions while sitting on the board:

Whitman profited from a practice called “spinning,” which a professor specializing in financial fraud and corruption calls a “quasi-kickback.” As the Sacramento Bee explains:

“(Spinning) involved offering a company’s executives and board members personal shares in IPOs as a reward for giving the investment firms corporate business. Investment firms initially denied that was their motive, but later agreed to ban the practice.

The firms offered key executives shares at starter IPO prices not then available to ordinary retail investors. The executives resold their shares within days, making millions.”

As CEO of eBay, Whitman hired Goldman Sachs to handle the company’s initial public stock offering. She was also a private banking client of the firm’s at the same time. She directed eBay to use Goldman Sachs for a second stock offering, too – and to help it acquire PayPal. Goldman Sachs got $8 million in fees from eBay while Whitman was CEO, while she made $1.78 million from those “spinning” deals.

Whitman had to pay $3 million dollars to shareholders to settle a lawsuit from that one.

But the far more insidious piece of this is the extent to which Goldman Sachs has been screwing the state of California over the past several years. In 2008 ProPublica reported that Goldman urged its investors to bet against California bonds while being paid to sell them, looking to profit off the economic misfortune of the state. Difficulty in selling the bonds would increase the interest rate California would have to pay to float them, expanding the profits of the likes of Goldman Sachs.

But wait, there’s more.

More recently, Bloomberg News reported that a $4.5 billion state bond offering, handled by Goldman, Citigroup, and JPMorgan Chase, fizzled last October, bringing in less money and costing the state more in interest than anticipated. The state had chosen to forego competitive bids in giving the deal to the trio of companies – which, according to Bloomberg, “made 12.4 million on the deal, contributing to record bonuses in the securities industry a year after getting a total of $80 billion in a federal bailout.” […]

At the same time, officials might ask why Goldman is happy to profit from our bond business while refusing to invest in California’s needs. In a February 2 meeting with the Greenlining Institute, the company claimed that it does not do business in California and therefore does not intend to invest in California in the foreseeable future – even as it is developing a major program of community development and investments in New York.

That seems an odd statement in light of the firm’s considerable California bond business. In fact, in 2008, about seven percent of Goldman’s global business could be attributed to California operations. In dollar terms, that means our state contributed about $2.1 billion to the company’s profits from 2006 through 2008.

All major banks doing business in California have substantial community reinvestment commitments aimed at low and moderate income communities. Bank of America, for example, has committed half a trillion dollars to Community Reinvestment Act programs in California over 10 years. Goldman, which managed to pay $11 billion in bonuses during the financial crisis year of 2008, has committed zero.

Goldman has also been implicated in a scheme to rob municipal governments in California and elsewhere through paying them below-market interest rates.

These are the friends, colleagues and financial backers of Meg Whitman. And they’ve been stealing from every taxpayer in California. It seems that would be election-year fodder for an opposing candidate, if Jerry Brown can be found.

David Dayen

David Dayen