On Feb. 28, prime executives at Goldman Sachs staged an “investor day” to reassure shareholders that the financial institution would rebound after a disappointing 2022. Barely an hour after the occasion ended, Goldman’s chief govt, David Solomon, boarded one of many firm’s Gulfstream jets en path to the Bahamas.
His vacation spot was the unique Baker’s Bay resort, which includes a world-famous golf course and a deepwater port massive sufficient to accommodate residents’ superyachts. Greater than a decade earlier, Mr. Solomon had bought a multimillion-dollar beachfront dwelling from the Discovery Land Firm, which constructed and managed Baker’s Bay.
Mr. Solomon is not only a Discovery buyer. He’s additionally a component proprietor of the non-public firm and for years has informally suggested its founder — at the same time as Goldman Sachs vied for work with Discovery.
Many company chief executives, after all, sit on different corporations’ boards of administrators, however such exterior commitments are a lot much less frequent within the closely regulated banking trade. Regulatory filings by most of Mr. Solomon’s counterparts on Wall Avenue don’t reveal related outdoors enterprise actions.
Mr. Solomon’s relationship with Discovery raises questions concerning the potential for conflicts of curiosity and distractions from his day job operating an elite Wall Avenue financial institution.
Tracy Yue Wang, the chairman of the finance division on the College of Minnesota’s Carlson Faculty of Administration, mentioned a battle might come up if Mr. Solomon ever had to decide on between advancing Goldman’s enterprise and nurturing his private funding in Discovery.
“It’s positively not good company governance observe,” she mentioned.
Stephen Lubben, an knowledgeable in company governance and enterprise ethics at Seton Corridor Legislation Faculty, mentioned Goldman’s regulators and shareholders may fear about Mr. Solomon turning into distracted. “Working a serious monetary establishment may be very a lot a full-time job,” he mentioned.
Over the previous two years, Mr. Solomon has used Goldman’s company jet greater than 20 occasions to fly to Discovery properties, together with these the place he doesn’t personal houses, based on flight information reviewed by The New York Occasions and folks conversant in Mr. Solomon’s travels.
In a regulatory submitting, Mr. Solomon mentioned he spends “lower than eight hours per 12 months” as a “passive board observer” for Discovery.
Tony Fratto, a Goldman spokesman, mentioned Mr. Solomon’s funding in Discovery was within the “single-digit tens of millions.” He mentioned Mr. Solomon has no fiduciary duties towards Discovery and “isn’t concerned within the enterprise operations” of the corporate.
Mr. Fratto mentioned there was “no battle in any respect” between Mr. Solomon’s job at Goldman and his relationship with and funding in Discovery. “It’s absurd to suppose he’d information his decision-making right here for such a small private funding,” he mentioned. Mr. Fratto mentioned Mr. Solomon reimburses Goldman when he makes use of its jet for private causes.
Jill Basinger, Discovery’s chief authorized officer, mentioned that Mr. Solomon was solely a small investor within the firm and that it had by no means executed enterprise with Goldman.
This isn’t the primary time questions have surfaced about how Mr. Solomon’s outdoors pursuits have an effect on his work at Goldman, for which he has acquired greater than $150 million in compensation since he turned chief govt in 2018.
Some financial institution workers have privately grumbled that his pastime performing as an digital dance music D.J. is a distraction, particularly with Goldman within the monetary doldrums and shedding 1000’s of workers. Now and again, Goldman workers have helped handle Mr. Solomon’s D.J. efficiency schedule, The Occasions beforehand reported.
Mr. Fratto mentioned the D.J. work was separate from Mr. Solomon’s day job. “I feel The New York Occasions is attempting to make this a sample,” Mr. Fratto mentioned.
Mr. Solomon has lengthy been associates with Michael Meldman, the ultrawealthy co-founder (together with actor George Clooney and former mannequin Rande Gerber) of the tequila model Casamigos.
Discovery, which Mr. Meldman based in 1994, builds small complexes of mansions, typically alongside a golf course and out of doors recreation space. They function one thing akin to summer season camp for the wealthy and well-known. They’re staffed with sports activities trainers to assist members be taught actions like kite boarding. Members can golf barefoot or in bathing fits and go to “consolation stations” — miniature sweet shops or replicas of New York delis — between holes.
Mr. Solomon purchased a Baker’s Bay mansion in 2011. Through the years, he and Mr. Meldman turned shut. Mr. Solomon has been a D.J. at Mr. Meldman’s birthday celebration, at Baker’s Bay New Yr’s Eve celebrations and on the opening of Discovery’s non-public seashore membership, Dune Deck, within the Hamptons.
The extra time they spent collectively, the extra concepts Mr. Solomon expressed about how Mr. Meldman ought to run the enterprise, based on three folks conversant in their relationship. “He advises Mike when Mike asks him questions,” Mr. Fratto mentioned. “Is that uncommon? In no way.”
Mr. Meldman in 2018 invited Mr. Solomon to an occasion on the 4 Seasons restaurant in New York with Danilo Medina, then the president of the Dominican Republic. One of many targets of the dinner was to steer Mr. Medina to construct a brand new airport on the island that may be used solely by Discovery and its members, based on two folks conversant in the dinner.
Mr. Fratto mentioned Mr. Solomon attended the dinner however didn’t push for the airport, which was by no means constructed. (A consultant of Mr. Medina didn’t reply to a request for remark.)
In 2017, Bryan Slotkin, a managing director at Goldman who regarded Mr. Solomon as a mentor, left the financial institution to affix Discovery. As soon as there, he launched a crew of actual property lenders in Goldman’s asset administration division to Discovery workers who had been managing a resort and housing growth in Cabo San Lucas, Mexico, based on folks conversant in the discussions.
Whereas the resort, known as Chileno Bay, was run by Discovery, it was owned by a gaggle of outdoor builders. These builders had beforehand taken out a $40 million mortgage from one other lender.
Following Mr. Slotkin’s introduction, Goldman purchased after which expanded the mortgage. A Discovery worker and a consultant of the house owners quickly negotiated with Goldman bankers to refinance it.
The Discovery worker reported to colleagues, together with Mr. Meldman, that Goldman had “accepted some significant phrases the Borrower requested,” based on an e mail reviewed by The Occasions. Describing the progress as “very thrilling,” the worker mentioned Goldman was providing comparatively low charges. Refinancing with Goldman as a substitute of discovering a brand new lender could be cheaper, based on “each dealer or lender now we have spoken with within the market,” the worker wrote. The deal went by in 2020.
Mr. Solomon was not concerned within the refinancing, Mr. Fratto mentioned. The Goldman workers in control of the division that made the mortgage knew of Mr. Solomon’s friendship with Mr. Meldman, based on a former Goldman govt.
One other crew of Goldman bankers, in the meantime, met with Discovery executives to pitch them on different companies. Discovery hoped to boost cash by promoting shares of itself to a choose group of outdoor buyers. It marked an vital milestone for the non-public firm, which till then had not supplied fairness to outsiders.
To organize for the pitch, Goldman’s crew pored over Discovery’s funds to find out how a lot the corporate was value. They estimated that its worth was considerably beneath $1 billion.
That was lower than Mr. Meldman had hoped. Mr. Solomon personally delivered the disappointing information to his pal, based on two folks conversant in the dialogue. Goldman didn’t win the task.
Mr. Fratto mentioned the lower-than-expected valuation confirmed that Goldman was not giving particular remedy to an organization with ties to Mr. Solomon.
In early 2021, Discovery accomplished the non-public fund-raising, with out the assistance of a financial institution. The corporate bought $300 million of shares to buyers together with Mr. Solomon. Now he was greater than a Discovery adviser — he was additionally a part-owner.
Mr. Fratto mentioned Mr. Solomon’s funding was accepted by Goldman’s compliance division. He mentioned Mr. Solomon must recuse himself from any future selections involving Discovery.
Shortly after the fund-raising, Discovery created an advisory board. Mr. Solomon was granted “observer” standing, which means he might attend conferences.
Final September, the group gathered in Beverly Hills, the place Discovery has workplaces. Mr. Fratto mentioned that was the one assembly Mr. Solomon attended.
Flight information present that, since his funding in Discovery, a Gulfstream jet that’s nearly solely utilized by Mr. Solomon has flown roughly as soon as 1 / 4 to places just like the Hamptons, the Masters golf match in Augusta, Ga., and Baker’s Bay. Mr. Meldman’s Gulfstream was at these places on the identical time.
In January, Mr. Solomon spent a weekend at Discovery’s resort in Cabo San Lucas. That Monday, he flew to Los Angeles and watched the school soccer championship recreation from a non-public field alongside a number of Discovery executives and buyers, together with Mr. Meldman. Kelley James, a musician who typically performs at Discovery properties, posted a photograph of the group on Instagram.
Mr. Fratto mentioned the journey and the sport had nothing to do with Discovery.
“This man spends all his time on Goldman Sachs work,” he mentioned. “He’s obsessive about Goldman Sachs.”
Matthew Goldstein and Hogla Betiza contributed reporting.