Settlement In the Matter of Steven J. Kaseta

Date: 06/19/1997
Organization: State Ethics Commission
Docket Number: 565

Table of Contents

Disposition Agreement

This Disposition Agreement ("Agreement") is entered into
between the State Ethics Commission ("Commission") and Steven J.
Kaseta ("Kaseta") pursuant to Section 5 of the Commission's
Enforcement Procedures. This Agreement constitutes a consented to
final Commission order enforceable in the Superior Court, pursuant
to G.L. c. 268B, s.40).

On April 11, 1995, the Commission initiated, pursuant to G.L.
c. 268B, s.4(a), a preliminary inquiry into allegations that
Kaseta had violated the conflict of interest law, G.L. c. 268A. The
Commission has concluded the inquiry and, on January 15, 1997,
voted to find reasonable cause to believe that Kaseta violated G.L.
c. 268A, s.3(b).

The Commission and Kaseta now agree to the following facts and
conclusions of law:

Findings of Fact

1. During the relevant time, Kaseta was a Massachusetts deputy
treasurer. As deputy treasurer, Kaseta was responsible for
overseeing the day-to-day administrative activities of the
Massachusetts Teachers and Employees Retirement Systems Trust ("The
MASTERS Trust").[1]

2. Goldman, Sachs & Company ("Goldman Sachs"), a Delaware
limited partnership, is an investment banking and securities firm
with headquarters in New York City. According to the firm's 1995
Annual Review, Goldman Sachs' activities and sources of revenue
include securities underwriting and distribution; trading of
corporate debt and equity securities, United States government and
agency securities, non-U.S. sovereign debt and mortgage and

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municipal securities; execution of swaps and other derivative
financial instruments; mergers and acquisitions; financial advisory
services for restructuring; private placements, and lease and
project financing; real estate brokerage and finance; merchant
banking; stock brokerage and research; asset management; and the
trading of currency and commodities. Goldman Sachs conducts its
business through five operating divisions: Investment Banking,
Fixed Income, Equities, Currency and Commodities, and Asset
Management. At the end of 1995, Goldman Sachs' assets totaled
slightly over $1 billion.

3. During the relevant time, Daniel J. McCarthy ("McCarthy")
was employed as a vice-president at Goldman Sachs' Boston
Institutional Department, which functions within the Equities

4. During the relevant time, Larry Kohn ("Kohn") was employed
as a vice-president with Goldman Sachs Asset Management ("GSAM"),
a division of Goldman Sachs.

5. In May 1991, the Massachusetts Treasurer's Office issued a
Request for Proposals ("RFP") for investment managers for $595
million in the MASTERS Trust domestic equity pension funds. On May
23, 1991, GSAM submitted a proposal in response to the RFP. In July
1991, the Treasurer's office awarded GSAM a contract to manage $100
million of these funds. This contract had an effective annual fee
of $400,000 to GSAM.

6. As deputy treasurer, Kaseta was a member of the selection
committee which recommended the award of the foregoing contract to
GSAM. Furthermore, as a deputy treasurer, Kaseta was responsible
for evaluating Goldman Sachs' performance under the contract from
the time the contract was awarded in July 1991 to September
1993.[2] Finally, as deputy a treasurer, Kaseta was in a position
along with the Treasurer's other staff to award similar contracts
in the future.

7. On two occasions between April 1991 and May 1993, McCarthy
entertained Kaseta with meals and theater tickets, Kaseta's pro
rata share of which cost $50 or more. On March 12, 1992, McCarthy
provided Kaseta with two tickets to "Man of La Mancha" at the
Colonial Theater in Boston. On this same date, McCarthy also
provided Kaseta and his guest with dinner at Locke-Ober Restaurant.
The total cost of this March 12, 1992, entertainment for Kaseta and
his guest was approximately $130. On December 10, 1992, McCarthy
provided Kaseta with drinks and dinner at the Post House Restaurant
in New York City. Kaseta's pro rata share of the cost of this
December 10, 1992, meal was approximately $95.

8. Additionally, on December 5, 1991 and June 26, 1992, Kohn
provided Kaseta with theater tickets for shows in New York City.
The cost of these tickets was approximately $290.

9. Goldman Sachs reimbursed McCarthy and Kohn for all of the
expenses they incurred in entertaining Kaseta. Goldman Sachs viewed
the expenses as business expenses warranting reimbursement. In
total, Goldman Sachs, through McCarthy and Kohn, provided Kaseta
with items of substantial value with an aggregate cost of
approximately $500.

Conclusions of Law

10. Section 3(b) of G.L. c. 268A, the conflict of interest
law, prohibits a state employee from, directly or indirectly,
receiving anything of substantial value for or because of any
official act or act within his official responsibility performed or
to be performed by him.

11. As a deputy state treasurer, Kaseta was a state employee.

12. Anything with a value of $50 or more is of substantial
value for s.3 purposes.[3]

13. The decisions and actions by Kaseta regarding the
recommending and monitoring of contracts to manage Masters Trust
assets were official acts performed or to be performed by him as a
deputy treasurer. [4]

14. Kaseta accepted the above free meals and tickets of
substantial value for or because of official acts or acts within
his official responsibility performed or to be performed by him. In
doing so, Kaseta violated s.3(b).[5]

15. The Commission is aware of no evidence that any of the
foregoing entertainment and meals were given to Kaseta with the
intent to influence any specific official act by him as a deputy
treasurer. The Commission is also aware of no evidence that Kaseta,
in return for entertainment and meals, took any official action
which would have affected Goldman Sachs. In other words, the
Commission is aware of no evidence that there was any quid pro quo.
The Commission is aware of no evidence that Kaseta at any time
acted in a manner inconsistent with the best interests of the

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Masters Trust. However, even if Kaseta understood that Goldman
Sachs' employees were only intending to create goodwill, Kaseta's
receipt of these gratuities was still impermissible.

16. Kaseta fully cooperated with the Commission's


In view of the foregoing violations of G.L. c. 268A, s.3(b),
the Commission has determined that the public interest would be
served by the disposition of this matter without further
enforcement proceedings, on the basis of the following terms and
conditions agreed to by Kaseta:

(1) that Kaseta pay to the Commission the sum of $1,500 as a
civil fine for violating G.L. c. 268A, s.3(b);

(2) that Kaseta waive all rights to contest the findings of
fact, conclusions of law in terms and conditions contained in
this agreement in any related administrative or judicial
proceeding to which the Commission is or may be a party.

[1] The MASTERS Trust is the combined investment fund for
state employees and state teachers retirement annuities. G.L. c.
32, s.23 establishes a non-paid Pension Investment Committee
("PIC") to oversee the MASTERS Trust. The day-to-day administrative
activities of the trust are carried out by the Massachusetts
Treasurer's Office. The MASTERS Trust is a broadly diversified
portfolio which stood at $5.532 billion at the end of February

[2] Kaseta. resigned from the Treasurer's office in September

[3] See Commonwealth v. Famigletti, 4 Mass. App. 584 (1976);

[4] "Official act," any decision or action in a particular
matter or in the enactment of legislation.

[5] In determining whether the items of substantial value have
been given for or because of official acts or acts within one's
official responsibility, it is unnecessary to prove that the
gratuities given were generated by some specific identifiable act
performed or to be performed. As the Commission explained in
Advisory No. 8 (issued May 14, 1985):

Even in the absence of any specifically identifiable matter
that was, is or soon will be pending before the official, s.3
may apply. Thus, where there is no prior social or business
relationship between the giver and the recipient, and the
recipient is a public official who is in a position to use
[his] authority in a manner which could affect the giver, an
inference can be drawn that the giver was seeking the goodwill
of the official because of a perception by the giver that the
public official's influence could benefit the giver. In such
a case, the gratuity is given for his yet unidentifiable "acts
to be performed."

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