Another Curious Obama Nomination
Key facts concerning Hormats’s role in the PetroChina IPO:
With the PetroChina IPO facing significant opposition from human rights advocates, Hormats assured members of the press that no funds from the offering would be used for work in Sudan.
These statements later proved to be inaccurate and misleading. Several large institutional investors, including Harvard, have since divested from PetroChina, citing human rights concerns.
The SEC later cited Hormats’s remarks as evidence of illegal market tampering, or “market conditioning,” in a larger case against Goldman Sachs, which the bank settled for $2 million.
Forgot to post this earlier, about last Friday’s nomination of Bob Hormats, a former Goldman banker, to a key post as Undersecretary of State under Hillary Clinton. Thanks to Kevin O’Connor at the Littlesis website for the heads-up.
Hormats has an odd past to say the least, and some friends of mine from my Russia days tell me I should remember his name, as he was apparently involved in the effort to get Rusia to liberalize its markets back in the Yeltsin years. The thing people are focusing on, however, is his behavior surrounding Goldman’s handling of the PetroChina IPO. In the face of public criticism of the deal, which some worried would end up supporting a genocidal regime in Sudan (PetroChina had significant interests there), Hormats lied to a number of press outlets, including the still-pissed-about-it Washington Post, saying that none of the money from the China deal would end up in Sudan.
This was later proved untrue; moreover, just by saying anything at all, Hormats violated SEC rules against public statements that might arouse interest in a deal before it is registered with the SEC. As noted above, Goldman was eventually fined $2 million by the SEC for the incident, a classic example of “regulation” — the IPO was worth $3 billion, so the cost-benefit analysis here still looks pretty good from Goldman’s end.
Goldman in that deal also got punished for sending out promotional materials about the IPO to institutional investors before the SEC registration. I mention this because these materials are very amusing — the funniest being a section on PetroChina’s earnings potential that was headlined, “SIZE DOES MATTER.”
Given everything that’s gone on recently, I just don’t get what’s going on with Obama’s appointments. You’ve got to fill a key post at State, and you can’t find someone who isn’t a former Goldman banker with a controversial human-rights profile? There are an awful lot of people on the earth; why this clown? I find it impossible to believe that the administration is not sensitive to the current unpopularity of this bank, which raises the question of what the message is here. Even leaving aside the moral aspect of this, politically it just seems like such a strange move.