Goldman's PR supremo caught up in 'spinning' row

Goldman Sachs' incoming public relations supremo was caught up in a hugely embarrassing row yesterday after his current employer, The Sunday Times, published damaging allegations about the investment bank.

Rory Godson, The Sunday Times' business editor who takes over in January as director of corporate affairs for Goldman Sachs International, was forced to leave his office last Friday after being told the article was about to appear.

The story, by the paper's Insight team, appeared on the front page of the business section yesterday and accused Goldman's London operation of engaging in some of the questionable business practices that have shamed Wall Street.

Specifically, the paper claimed Goldman's had enabled two of its clients to make large profits by granting them privileged access to shares in the public flotation of a technology company, a practice known as "spinning". The article also alleged that Goldman's had maintained "ridiculous" recommendations on a number of telecoms companies that were clients of its corporate finance arm even though its own analysts had serious doubts about the prospects of the companies.

Goldman's yesterday described the article as "Sunday journalism at its worst" but said the publication of the allegations did not affect Mr Godson's appointment. "He found himself in a very difficult position which was not of his own making and acted honourably and appropriately by leaving immediately," a spokesman said.

According to the three-month Insight investigation, two of Goldman's clients, Brian Long and Peter McManamon, made profits of almost £500,000 after being given access to shares in the flotation of Bookham Technology. At the time Goldman's was working separately on the flotation of the two men's company, Parthus.

The paper also quotes an e-mail exchange between the co-heads of Goldman's global telecoms research team in London and New York, in which they admitted stock ratings were optimistic but that "investment banking considerations" prevented them from making changes.

Last night Goldman's said: "We gave categorical denials to The Sunday Times – denials they chose to ignore. For the record: Messrs Long and McManamon did not get their Bookham shares from us. We did not allocate shares to them and we did not direct shares to be allocated to them. To suggest otherwise is a malicious falsehood. We have never acted improperly and take suggestions to the contrary very seriously. As for the e-mail snippets, the exchange between two of our analysts has been taken entirely out of context."

Richard Caseby, managing director of The Sunday Times, said: "We stand by our story. The investigation uncovered some truths which Goldman Sachs finds unpalatable. The bank has some serious ethical questions to answer."

Goldman's said it was "considering its options" and might take legal action. A complaint to the Press Complaints Commission is thought more likely.

Mr Godson is technically employed by The Sunday Times for another fortnight but is not expected to return to work there. Colleagues said that although Mr Godson regarded the timing of the story as "bizarre" it was the product of "a cock-up, not a conspiracy" by the paper.