Thomas Ronai to Lloyd Blankfein Letter Re Goldman Sachs Purchase of PDVSA Bonds (30 May, 2017)
Dear Mr. Blankfein,
I read with amazement that your firm has negotiated with Venezuela’s central bank a significant tranche of PDVSA bonds. You surely understand that this deal has provided additional resources to a cruel dictatorship that is repressing and killing its own citizens! Yes, I understand that Goldman Sachs operates within the crude underbelly of capitalism, and that a buck is a buck, but I assume that your actions are guided by some component of morality. Surely your predecessors running the company in the 1930’s were not actively involved in financing the Third Reich with bond deals. All those lovely words about social conscience that you sport in your Citizenship section on your website seem to me to ring very hollow.
It is a great shame that – with one poorly considered deal – you have negated all the benefits and more of your investments in building your corporate image. Now you can spend the rest of this year’s budget apologizing for your inadequate controls in this critical area. Of course, you knew nothing about this deal a priori. Now you will have to expend your efforts trying to make your constituencies believe you knew nothing, and that this was all just an unfortunate mishap.
And, ironically, the consequences don’t end there. Rest assured that Venezuela (PDVSA included) is going to default. Even at a cost of 31 cents on the dollar, GS stands to lose good money on this tainted investment. More so, if the next government, really upset by your lack of solidarity with the population in this time of need, does try to block any payout of your purchase. At the very least, your firm will be awaiting payback for a long time.
My own reaction is one of disgust with the behavior of GS. I well remember the days when – in the depth of the financial crisis – your firm panicked and rushed to adopt the status of a commercial bank, saving yourselves by putting on the mantle of being “too big to fail”. Yes, you did save yourselves then. But it seems that you developed no empathy from this near-death experience for those involved in your transactions – now in this particular case, the suffering inhabitants of Venezuela. That does not augur well for the continuity of your business.
Inevitably, you will soon be gone from the leadership of GS. You are certainly aware that it is all very ephemeral. It is a real shame that your tenure will be besmirched by this transaction. Its modest potential gains cannot compare with the reputational harm it will cause you.
So I ask you: what can GS do to make amends? I hope you can come up with a satisfactory solution.
Best regards,
Thomas Ronai
BA (Yale), MBA (Harvard), MA (Yale)
P.S. Mr. Blankfein, you might want to know why I am so outraged by the Goldman Sachs-PDVSA bond deal. I am a Venezuelan by adoption, going to work there after receiving my MBA from Harvard (1972). I formed my own consulting company there, and we gave strategic counsel to organizations like G.E., IBM and PDVSA. 26 years later, when Chavez was elected, I had the good fortune to anticipate some of the disasters that were to come, liquidated my firm, and headed to Yale to pursue further studies. I have watched with indignation as supposedly responsible foreign investors (including many of the world’s premier investment banks) have willingly aided and abetted this regime destroy itself and the country, enthusiastically reaping the profits in schemes they knew were crazy, where the only real purpose was to strip out the assets of the nation. A number of my family members couldn’t follow us when we departed, and they have lived a life of shortages and of great danger. The support of GS and others for these evil human beings who have sacked the country is inexcusable. Your reaction so far is no lifejacket for the suffering population, in spite of what your PR department claims. Rather, it is an affront to all decent Venezuelans.
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