On February 28, Goldman Sachs management held an “Investor Day” to reassure shareholders that the company would recover from a slump in 2022. A jet plane to the Bahamas.
His destination was Baker’s Bay luxury resort, with a world-famous golf course and a deep-sea port big enough to accommodate the residents’ superyachts. More than a decade ago, Mr. Solomon had purchased a multi-million dollar beachfront home from Discoveryland, his company that built and managed Baker’s Bay.
Solomon isn’t the only Discovery customer. He is also a co-owner of a privately held company and has privately advised the founders for many years.
Of course, many corporate CEOs sit on the boards of other companies, but such outside commitments are less common in the highly regulated banking industry. Regulatory filings by most of Solomon’s Wall Street counterparts do not reveal similar outside business activities.
Solomon’s relationship with Discovery raises questions about potential conflicts of interest and distractions from his day-to-day operations of running an elite Wall Street bank.
Tracey Yue Wang, director of finance at the University of Minnesota’s Carlson School of Management, said conflict could arise if Solomon were forced to choose between pursuing Goldman’s business or promoting a private investment in Discovery. said it could happen.
“It’s definitely not good corporate governance practice,” she said.
Goldman Sachs regulators and shareholders may be concerned that Solomon will become a distraction, said Steven Raben, an expert in corporate governance and business ethics at Seton Hall Law School. said it couldn’t. “Running a major financial institution is a very full-time job,” he said.
Over the past two years, Solomon has flown more than 20 Goldman jets to Discovery facilities where he does not own a home, according to flight records reviewed by The New York Times and people familiar with him. flied. Solomon’s Journey.
of Submissions to regulatory authoritiesSolomon said he spends “less than eight hours a year” as a “passive board observer” at Discovery.
Goldman Sachs spokesman Tony Flatt said Solomon’s investment in Discovery was “millions of dollars.” He said Solomon has no fiduciary responsibility to Discovery and is “not involved in the business operations” of the company.
Fratto said there was “no contradiction” between Solomon’s work at Goldman and his relationship and investment with Discovery. “It’s absurd to think that he guides decisions here for such a small personal investment,” he said.Fratto said Solomon said that for personal reasons he Goldman will be reimbursed for the use of Goldman jets.
Discovery’s chief legal officer, Jill Basinger, said Solomon was only a minor investor in the company and had never done business with Goldman.
Since becoming chief executive officer in 2018, he has received more than $150 million in compensation for Goldman’s work on how Solomon’s outside interests affect his work. This is not the first time that doubts have surfaced.
Some bankers privately complain that his hobby of electronic dance music DJing is a distraction. From time to time, Goldman employees help Solomon manage his schedule of DJ performances, The Times previously reported.
According to Fratto, DJing is separate from Solomon’s day job. “I think the New York Times is trying to make this a pattern,” Flatt said.
Solomon has long been friends with Michael Meldman, the ultra-rich co-founder of tequila brand Casamigos (along with actor George Clooney and former model Rande Gerber).
Founded by Meldman in 1994, Discovery typically builds small residential complexes along golf courses and outdoor recreation areas. They act as something akin to summer camps for the rich and famous.There are always sports trainers available to help you learn activities such as kiteboarding. Members can play golf barefoot or in bathing suits, and visit “comfort stations” (a miniature replica of his candy store or New York deli) between holes.
Solomon purchased the Bakers Bay mansion in 2011. Over the years, he and Mr. Meldman became close friends. Mr. Solomon DJed at the opening of Mr. Meldman’s birthday party, Baker’s New Year’s Eve celebration in his Bay, Discovery’s private He’s Beach He’s Club, Dune He’s Deck in the Hamptons.
The more time they spent together, the more Solomon expressed his thoughts on how Meldman should run his business, according to three people familiar with their relationship. . “He advises Mike when Mike asks him a question,” Flatt said. “Is that unusual? Not at all.”
In 2018, Meldman invited Solomon to an event at the Four Seasons Restaurant in New York with then-Dominican President Danilo Medina. One of the goals of the dinner was to persuade Medina to build a new airport on the island, according to two people familiar with the dinner.
Flatt said Solomon attended the dinner but did not push for the construction of the airport. (A representative for Medina did not respond to a request for comment.)
In 2017, Goldman’s managing director Brian Slotkin, who saw Mr. Solomon as a mentor, left the bank to join Discovery. There, he introduced a team of property lenders in Goldman’s wealth management division to Discovery employees, who managed resort and residential developments in Lucas, Mexico, according to people familiar with the matter.
The resort, called Chileno Bay, was operated by Discovery but owned by a group of outside developers. These developers had previously taken his $40 million loan from another lender.
Following Slotkin’s introduction, Goldman bought the loan and then expanded. Discovery employees and owner representatives quickly negotiated with Goldman’s bankers to refinance.
Discovery employees reported to colleagues, including Meldman, that Goldman “accepted some meaningful terms requested by borrowers,” according to emails seen by The Times. Describing the progress as “very exciting,” the employee said Goldman Sachs was offering relatively low fees. Instead of finding a new lender, it would be cheaper to refinance with Goldman, the employee wrote, according to “every broker or lender we spoke to in the market.” The deal was completed in 2020.
Flatt said Solomon was not involved in the refinancing. Former Goldman executives said Goldman employees in charge of the units that made the loans were aware of the friendship between Mr. Solomon and Mr. Meldman.
Meanwhile, another team of Goldman bankers met with Discovery executives to pitch other services. Discovery wanted to raise capital by selling its shares to a select group of outside investors. This was an important milestone for a privately held company that had not previously offered shares to outsiders.
In preparation for the pitch, Goldman’s team took a close look at Discovery’s financials to determine the company’s value. They estimate its value to be well below $1 billion.
It was less than Mr. Meldman had hoped for. Two people familiar with the matter say Solomon told his friend the disappointing news. Goldman did not win the task.
Flatt said the lower-than-expected valuations show Goldman does not give special treatment to companies associated with Solomon.
In early 2021, Discovery completed a private financing, without bank assistance. The company sold $300 million in shares to investors, including Solomon. Today, he was more than an advisor to Discovery and a co-owner.
Fratto said Solomon’s investment was approved by Goldman’s compliance department. He said Solomon must step aside from any future decisions regarding Discovery.
Shortly after the funding, Discovery established an advisory board. Mr. Solomon was given “observer” status and was able to attend the meeting.
Last September, the group met in Beverly Hills, where Discovery has offices. Fratto said it was the only meeting Solomon attended.
Flight records show that the Gulfstream jet, which Solomon has used almost exclusively since he invested in Discovery, has flown roughly quarterly to locations such as the Hamptons, the Masters Golf Tournament in Augusta, Georgia, and Baker’s Bay. 1 flight. Mr. Meldman’s Gulfstream was in those places at the same time.
In January, Solomon spent the weekend at Discovery’s resort in Cabo San Lucas. That Monday, he flew to Los Angeles to watch a college football championship game from his private box with several Discovery executives and investors, including Meldman. Kelly James, a musician who often performs at Discovery facilities, Posted Instagram group photo.
Fratto said the trip and games had nothing to do with Discovery.
“This guy spends all his time working for Goldman Sachs,” he said. “He’s crazy about Goldman Sachs.”
Matthew Goldstein and Hogla Betiza contributed reporting.
