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Public Citizen: Subsidiary of Goldman Sachs is misrepresenting affiliation

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Public Citizen: Subsidiary of Goldman Sachs is misrepresenting affiliation

Hot on the heels of its successful challenge to a JPMorgan Chase & Co. subsidiary's involvement in the proposed sale of El Paso Electric Co., Public Citizen is now claiming that a subsidiary of The Goldman Sachs Group Inc. is mischaracterizing its relationship with its parent.

In a Dec. 30, 2019, filing with the Federal Energy Regulatory Commission, Public Citizen said Goldman Sachs Renewable Power Marketing LLC applied for market-based rate authority "claiming ― we are not making this up ― that it is not an affiliate" of Goldman Sachs "despite the fact that they share a name, employees, the same offices, the same phone number, and the provision of significant interrelated financial services."

Public Citizen said Goldman Sachs Renewable's nonaffiliation claim is significant because Goldman Sachs is one of the largest investment banks in the world and has a separate, significant presence in FERC-jurisdictional markets.

For instance, the group noted that Goldman Sachs is one of the largest power marketers in North America and a registered swap dealer. Moreover, in its Dec. 9, 2019, application (FERC docket ER20-547) for market-based rate authority, Goldman Sachs Renewable reveals its "investment manager" is Goldman Sachs Asset Management LP, which also manages the renewable energy portfolio for Goldman Sachs.

Since Goldman Sachs Renewable's claim that it is unaffiliated with Goldman Sachs "carries significant regulatory and legal advantages for both entities," Public Citizen asked FERC to direct Goldman Sachs Renewable to amend its Dec. 9 application to help clarify the various relationships it has with Goldman Sachs and the bank's various subsidiaries.

Specifically, Public Citizen said Goldman Sachs Renewable needs to file its articles of incorporation and organization, corporate bylaws, operating agreements, certificate of formation, corporate charter and shareholder agreements. Of particular concern to Public Citizen is the application's failure to detail how the company's board members "are nominated, selected, compensated, or their length of terms ― information needed to determine who controls the board."

The group further urged FERC to require Goldman Sachs Renewable to reveal the names of its three board members, who the Dec. 9 application said "manage and control" the company, as well as those individuals' professional and financial affiliations.

In particular, the group noted that the Dec. 9 application lists Goldman Sachs Vice President Patrick McAlpine as the contact for Goldman Sachs Renewable, "and a business address, phone number and email address all identified" with Goldman Sachs. Thus, Public Citizen urged FERC to direct Goldman Sachs Renewable to confirm whether they have any employees independent of Goldman Sachs.

In a Jan. 2 supplemental protest, Public Citizen said it had discovered the identities of the three Goldman Sachs Renewable board members and found that the same three individuals — Andrew Galloway, Andrew Johnson and John Lewis, all based in the Cayman Islands — serve as corporate directors for an additional 60 "shell companies," all affiliated with Goldman Sachs.

Public Citizen said it further learned that the three are affiliated "with unusual Cayman Islands-based firms that provide directors-for-hire." The group noted that for each of the 61 alleged shell companies, an affiliate of Goldman Sachs is the lone recipient of the sales of securities for the company. In addition, 55 of those companies share a principal address and phone number with Goldman Sachs' main office in New York.

"The fact that [Goldman Sachs] employs these same three directors for at least 61 affiliated shell companies renders these individuals unable to claim independence from [Goldman Sachs]," Public Citizen stated. "These disturbing revelations help explain why [Goldman Sachs Renewable] was so eager to conceal from FERC the three names of its corporate directors."

Goldman Sachs did not immediately respond to a request for comment Jan. 2 on Public Citizen's accusations.

Public Citizen raised similar concerns about the failure of the buyer of El Paso Electric to disclose an investment fund's relationship with a JPMorgan Chase & Co. subsidiary in seeking FERC approval of that deal (FERC docket EC19-120).

The group's protest led FERC on Dec. 5, 2019, to give the buyer ⁠— IIF US Holdings 2 LP, which is advised by J.P. Morgan Investment Management Inc.— 30 days to disclose much of the same information sought by Public Citizen when the group raised questions about the close ties between the two entities. Among other things, Public Citizen discovered that IIF 2 appeared to be entirely staffed by JPMorgan Chase employees and the three current owners may not have invested any meaningful capital in the fund.

After similar concerns were raised in the proceeding seeking Texas regulatory approval of the deal, the applicants agreed that Sun Jupiter Holdings LLC, a subsidiary of IIF 2 that would merge with and into El Paso Electric if the sale is approved, should be considered an affiliate of the investment bank, the El Paso Times reported Dec. 27, 2019.