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Chip Hanlon

Chip Hanlon

Posted: May 4, 2010 06:06 PM

Goldman Basher Poizner Dumped Tech on You at the Market Top

What's Your Reaction:

I'm a conservative, but even my friends on the Left here at Huff Po will probably find this interesting.

Lately, there's been a lot of smoke rising from the fire that is Goldman Sachs, of course, but here's one little cloud that might actually add up to something.

What if I told you that one candidate in the California GOP gubernatorial primary received a $500,000 loan interest-free from Goldman Sachs?

That candidate?

Wait for it...

Wait...

It's none other than acclaimed Goldman-basher, Steve Poizner!


Well, ok, it wasn't exactly in this race, but $500k is precisely the amount Poizner reported as an interest-free loan on Form 460 in his 2004 run for State Assembly. True story. View it for yourself here. (The report, by the way, came from what was his election committee called "Reformers for Steve Poizner." I'm guessing those weren't exactly arch conservative GOP reformers given his beliefs at that time, know what I mean? source).

Still, this is a pretty surprising little nugget from such a spirited 2010 Goldman basher, no?

Now, if I'm to be fair, I suspect you can't really even call this an interest-free loan. See, it looks like he only called it interest-free on that disclosure form because he was already paying interest on that loan somewhere else: in his brokerage account at... Goldman Sachs!

Yup... can't make this stuff up. Check out his form 700 from that same year to see for yourself.

Be sure to take a close look at the terms of that loan. By the way, as one who's familiar with such things, I can tell you that a margin loan at just 60 basis points (0.6%) over the benchmark Fed Funds overnight rate is a puny, puny cost; one, dare I speculate, reserved only for a brokerage firm's biggest, most important clients.

But why would Steve Poizner have ever become a member of Goldman's elite private banking client list, which today reportedly requires a minimum of $25MM to become part of? Well, a Goldman executive was on the board of Qualcomm when it acquired Poizner's company, Snaptrack, for $1BB in stock, so maybe the investment firm pursued Poizner as a client when it saw how much money he made by shorting the tech sector in March of 2000!

That's right. Stay with me:

See, Qualcomm's takeover of Poizner's Snaptrack was announced at the end of January, 2000. Interestingly, it closed in just over 2 months (early April), meaning for some reason these two companies were in a big, big hurry. Making the whole transaction even more interesting is this fact: along the way -- on March 21st, to be precise -- Qualcomm filed a secondary offering of 6 miilion shares, just enough to let Poizner and his firm's private equity investors cash out entirely. That's right: Qualcomm didn't receive one dime of the proceeds from this particular offering. All it did was allow Steve Poizner, Benchmark Capital, Motorola, TI Ventures and others to pull the ripcord.

It's really not too hard to surmise just about how those takeover talks probably went:

Qualcomm (QCOM) to Poizner: "We'd like to buy your company for $1BB in stock."

Poizner to QCOM: "Terrific, but I don't trust this tech boom will last. I want cash."

QCOM to Poizner: "Hmmm...we don't like to pay in cash. Wait, we know where we can get it--from Wall Street! Let's rush to close the takeover of Snaptrack. While we do, we'll simultaneously file for a secondary offering that will allow you to dump all of your new Qualcomm shares off to investors!"

Poizner to QCOM: "Sweeeeet!"

When that offering was filed on March 21, shares in Qualcomm traded near $150, a price from which it almost immediately started tanking. Just over two years later, it traded below $30. A sweet deal? Not for those who bought Poizner's shares (for which he pocketed more than $200MM, by the way).

OK, so I can't technically call that "shorting" the tech market, but it's clear he wanted out badly-- you know, about as badly as Goldman wanted to short subprime!

If I were Team Poizner, I'd be asking what did Poizner know? When did he know it? How can he live with himself knowing that he dumped toxic Qualcomm shares off to unsuspecting, innocent investors? Ten years later, those shares are still underwater by 50%, by the way!

And that's the problem here: in all his recent bashing of Goldman Sachs, Steve Poizner has proven to be the worst sort of hypocrite.

Personally, I don't have a problem with Poizner's taking a loan from Goldman on margin. I don't consider him criminal for having twice run more than $1MM through an Exchange Fund from-- guess who?-- Goldman Sachs, presumably to defer a big capital gains tax hit. Oh, I forgot to mention that little peach? Yup, here's one right here. I don't hold him liable for apparently having the foresight to have sold every share of QCOM he owned right before the top; investors need to do their own homework and, by the way, Poizner could have turned out to be wrong--or at least early-- in that opinion.

What I do care about is seeing any supposed conservative making one case about our financial mess, and one case only: that government was primarily to blame, not Goldman Sachs or any other private enterprise. Congress forced Fannie and Freddie into the subprime market. The Fed inflated the bubble through its interest rate policies. Decades of affordable housing policies including CRA created severe malinvest in the nation's housing stock. Regulators failed to give structure to the credit derivatives market, even though Alan Greenspan was aware of the problem and was trying to wrap his arms around it while on his way out as Fed Chairman.

Government, government, government. Our fearless leaders put us in today's bind, and any Republican who chooses instead to play the convenient game of demonizing Goldman should be abandoned entirely by conservatives. Poizner is exhibit A.

Just think, California conservative voters: Steve Poizner used to proclaim himself a "Schwarzenegger Republican" but now openly belittles Arnold, his former friend. He used to be a very valuable client of the world's most prestigious investment firm, the one it is now convenient for him to assail as corrupt.

You can worry all you want about Whitman's political ideals, but I am convinced that Poizner's character is untrustworthy, that he would 'go seagull' and crap on all of our conservative little heads at some crucial moment if ever elected governor. There is no other single conclusion that can be reached so clearly from having watched this whole primary; he has proven he has no principles, no core beliefs besides the desire to hold elected office.

Think about it: what's your big beef with Arnold, conservatives? It's that he's more interested in being popular than in having convictions, right? That he'll say anything. That he let you down.

Some of you are worried that Meg Whitman might be the next Arnold Schwarzenegger. By my way of looking at things, Steve Poizner has proven beyond all doubt that he is Arnold.

His shameless recent posturing around investment firm, Goldman Sachs, should remove all doubt.

 

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