Goldman Sachs keen to put 'muppet' show behind it

Goldman Sachs is ready to give its London office a clean bill of health after investigating claims from its former employee, Greg Smith, that the bank had a "toxic" culture where traders routinely boasted of ripping off their clients.

The investigation – dubbed "the muppet hunt" because Mr Smith said bankers derisively referred to clients as muppets – has not so far thrown up any revelations that would prompt disciplinary action, it is understood.

Goldman has now made contact with Mr Smith and asked him to assist, but he has not taken the bank through his allegations. Instead, he is working on a tell-all book, after landing a reported $1.5m advance from the publishing house Hachette. Mr Smith, a trader of equity derivatives at Goldman's offices in the City of London, stunned the bank last month by announcing his resignation in the pages of The New York Times.

In an opinion piece, under the headline "Why I Am Leaving Goldman Sachs", he described how the bank's moral standards had collapsed over his 12 years at the firm.

He blamed the "toxic and destructive" culture on chief executive Lloyd Blankfein and his deputy Gary Cohn. "It makes me ill how callously people talk about ripping their clients off," Mr Smith wrote.

"Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets', sometimes over internal e-mail."

Mr Smith's public denunciation of the firm ignited another firestorm of public criticism of Goldman, which is already the lightning rod for anger over Wall Street's role in the credit crisis.

His allegations also threatened to hit the bank where it is most vulnerable, by tarnishing its reputation with clients.

Fearful of that, Mr Blankfein launched the "muppet hunt" to scan internal email communications for disparaging comments about clients.

While the scan revealed isolated references, these did not hint that Goldman that traders believed they were taking advantage of their clients' idiocy to rip them off.