But stripped of its incendiary conclusions, Mr. Smith’s manifesto was curiously short on facts. Other than the now-infamous reference to muppets — “I have seen five different managing directors refer to their own clients as ‘muppets,’ sometimes over internal e-mail” — there were no examples of a toxic culture at work, no actual names of morally bankrupt people and no examples of a client getting ripped off. Mr. Smith declined to elaborate after the article was published, heightening suspense and no doubt fueling the literary bidding that reached a reported $1.5 million for a book that would deliver the goods.

That book, “Why I Left Goldman Sachs,” goes on sale on Monday. Despite tight security, copies of the book have been circulating, and I read one. The book not only fails to deliver concrete examples to back up his sweeping conclusions, but he admits changing “names or descriptors” for some (but not all) people and acknowledges that what he does disclose is “from memory.”

He says he has tried “to retain the spirit” of what actually occurred. This makes it nearly impossible to verify much of what he says.

Beyond that, from his perch on the equity trading desk he seems to have had a narrow view of the institution where he worked for nearly 12 years. His disillusionment comes across as heartfelt, but much of it seems to have come less from his own experiences than from news reports about the firm’s behavior in deals he wasn’t involved in.

Mr. Smith’s book might even bolster Goldman’s reputation. After all, if Mr. Smith is the ultimate insider, and this is as bad as it gets — Mr. Smith in a hot tub at the Mandalay Bay Hotel in Las Vegas with a topless woman — then he hasn’t made much of a case.

But Mr. Smith isn’t in much of a position to exonerate Goldman, either. The firm was deeply enmeshed in nearly all aspects of the financial crisis and its causes, including mortgage-backed securities. And after an injection of taxpayer support, it managed to profit handsomely and pay the lavish bonuses that Mr. Smith shared in. But you won’t find that story in “Why I Left.”

Mr. Smith declined to discuss any of this before his scheduled appearance on Sunday on “60 Minutes.” Goldman Sachs responded to some of my questions with copies of parts of their internal investigation and made several employees available.

Potential problems with Mr. Smith’s approach surface almost immediately. The first paragraph of Chapter 1 describes “an intern named Josh” who’s being “grilled” and asked to explain risk arbitrage but “was floundering badly.” Josh, Mr. Smith adds, is the son of a billionaire.

There was no “Josh” in Mr. Smith’s group of interns, and only one son of a billionaire: Teddy Schwarzman, son of Stephen Schwarzman, the chairman and chief executive of the asset management firm Blackstone Group.

“I was never grilled on risk arbitrage, or asked to give a presentation on it,” Mr. Schwarzman said when I contacted him this week. “I realize it was a long time ago, but I would certainly have remembered it if I had floundered.” Nor did anyone else in the class I spoke to recall such an episode.

Mr. Smith also recounts what purports to be a verbatim exchange between a Goldman vice president and a fellow intern named Brynn Thomas who graduated from Brown University. Brynn is interrogated and humiliated by her lack of knowledge about Microsoft, and “starts to tear up and runs out of the room.” Goldman said it has no record of anyone named Brynn Thomas, and other members of Mr. Smith’s intern class said no one by that name was in his class. Nor did they recall any such incident. “The program wasn’t that cutthroat, and it certainly wasn’t abusive,” said Mr. Schwarzman, now a movie producer. “No one ever ran out of a room crying. They were trying to recruit us and also to shape us. They had high expectations, but I learned a tremendous amount.”

(The actual person apparently described in the anecdote, a Brown graduate named Ebony Thomas who was an intern with Mr. Smith, didn’t respond to requests for comment.)

On the larger issue of whether Goldman was “ripping off” clients, his principal evidence is that while he was working in London in the two years before his resignation, Goldman was urging clients to buy or sell options on European banks while countries like Greece and Portugal were in the midst of debt crises. In Mr. Smith’s telling, Goldman was trying to get clients to take positions that Goldman was trying to get rid of, which Mr. Smith describes as “axes.” “The firm believes, deep down, that one outcome is going to transpire, yet it advises the client to do the opposite, so the firm can then take the other side of the trade and implement its own proprietary bet.”

But Goldman officials told me the firm never acted as a principal on any of those trades, and Mr. Smith doesn’t provide any specific examples where it did. Moreover, they noted, Mr. Smith sold United States equities and derivatives while he was in London, not European ones, so he would have had no direct knowledge of European options trading.

Mr. Smith also faults Goldman for constantly changing its views on the outlook for European banks, requiring clients to keep trading and presumably generating more commissions for the firm. “No thinking client could believe that conditions on the ground could change that frequently. It was so obviously misleading and disingenuous,” he writes. But Goldman officials said that anyone immersed in the European debt crisis and government responses at the time would understand that conditions changed frequently, and it was Goldman’s obligation to keep clients informed.

As for muppets — a mildly derogatory term common in British slang — Goldman officials said they had conducted an exhaustive search after Mr. Smith resigned. They said they found only one such reference to a client, and it was about educating the client, a midsize European bank, not taking advantage of it.

The mere mention of Mr. Smith invokes passionate reactions at Goldman, but much of the initial anger seems to have dissipated. People I spoke to who had been close to him felt hurt, wronged and saddened by a broadside from someone they considered a friend and colleague, dedicated to the firm and its values, who was hard-working, reliable and humble. He seemed, they said, the last person to attack the firm and its culture.

One of Mr. Smith’s fellow interns said, “I thought he loved the firm and its culture.” The former intern, now a managing director, said he helped organize a going-away party for him at SPiN, a Manhattan club with 17 Ping-Pong tables. (Mr. Smith was a table tennis champion in his native South Africa.) “In his book he makes every element of our intern program seem demeaning,” the former intern said. “It was intense and stressful, but it was fun. And we learned so much.” He showed me a yearbook he had saved from that summer with several photos of a beaming Mr. Smith.

The Goldman officials I spoke to all asked not to be named because they didn’t want to be drawn into a public debate about the book.

A partner who said he acted in many ways as Mr. Smith’s mentor and was in regular contact with him until shortly before he left, said: “He never raised any issue with me. I had no inkling. I thought he’d settled in in London and was doing fine. I know he was disappointed he hadn’t been made a managing director yet, but he just wasn’t ready. For some people it’s a sprint, but it took me 18 years to make managing director and 20 years to make partner. I told him to keep at it and good things will happen. Serve clients and they’ll serve you. Give them good ideas. London was a great opportunity for him, and I thought he was excited.”

One thing Mr. Smith was clearly unhappy about was his compensation, which had peaked at $500,000 and, like the compensation of most Goldman employees, had recently declined slightly. After he asked for a $1 million bonus, his supervisor wrote in an e-mail, “Greg Smith off the charts unrealistic, thinks he shld trade at multiples, we told him there’s v little tolerance for reactions like that and he needs to tone it down.”

The partner told me this week: “He was an outlier in London. Most people were disappointed but realistic. He had a complete disconnect from the macro environment. Europe wanted to outlaw bonuses. They were discussing bonus caps. We were laying people off. People were very sensitive to this.” The former intern added, “I was floored; I was beyond shocked” by Mr. Smith’s resignation and accusations. “He was making $500,000 at the age of 26 or 27 at a time when people were being laid off, and he complains? I can only conclude he was motivated by personal gain. The firm has been under attack, and I think he’s being opportunistic. None of it feels virtuous to me.”

Virtuous or not, “Why I Left” will surely not be the last word — good or bad — on Goldman. Fabrice Tourre, the young Goldman trader at the center of a now-infamous subprime mortgage deal, is scheduled to go on trial for civil fraud next July. Unlike Mr. Smith, Mr. Tourre was involved in a deal in which Goldman misled investors, the Securities and Exchange Commission has said. That deal has come to embody many of the excesses of the subprime mortgage bubble — something that actually did help cause the financial crisis. Mr. Tourre has denied any wrongdoing and is on unpaid leave from Goldman while studying for a Ph.D. at the University of Chicago and doing volunteer work in Rwanda.

Mr. Tourre hasn’t signed a seven-figure book deal, but he could surely get one — and if he does, it could be a tell-all worth reading.

Former Goldman Sachs employee blows the whistle on unethical business practices

View Source