US clients may break from Goldman Sachs

CLIENTS of Goldman Sachs may break ties with the investment bank following allegations it misled investors over the sale of complex mortgage products.

The firm, which is facing a civil lawsuit by US watchdog the Securities & Exchange Commission, is also set to provoke more ire as it revealed it paid London-based staff $5.5 billion (3.6bn) in salary and bonuses last year.

Capricorn Investment Group, a $7bn family company which counts former US vice-president Al Gore as a client, is understood to be reviewing its use of Goldman Sachs for business transactions. The California-based firm is thought to be the first among dozens to consider dropping the investment bank as it faces further inquiries by the US Justice Department and Britain's City watchdog, the Financial Services Authority.

But investor Warren Buffet last week defended the bank and its chairman, Lloyd Blankfein. He told investors in his firm Berkshire Hathaway that he "loved" his $5bn stake in Goldman and that Royal Bank of Scotland was "dumb" for losing $900 million on the $1bn transaction under scrutiny from civil and criminal investigators.

Goldman continues to consistently and publicly deny all allegations levelled against it.

Almost 5,500 London-based staff of the bank were paid an average of $1m each last year as criticism of high pay for bankers continues to rage. Accounts filed at Companies House last week show Goldman Sachs International also paid $600m to cover the Treasury's bonus tax.

The bank was also the butt of jokes made by US president Barack Obama on Saturday at the annual White House Correspondents' Association dinner.

Obama said that all of his jokes at the black-tie dinner were "brought to you by" Goldman Sachs.

"Don't worry," he told the nearly 3,000 people in attendance. "They make money whether you laugh or not."