In 2022, KSFB’s executives hired Goldman, which had promised to pursue a joint sale of KSFB and the NKSFB business, according to the lawsuit filed in New York on Thursday. But unbeknown to them, the lawsuit contends, Goldman, which was also working to sell Focus, wanted to keep NKSFB within the larger firm to fetch a higher price.
KSFB accuses Goldman of stringing it along, gaining valuable information about the business while delaying its potential sale to benefit a larger client. Focus was eventually sold to the private equity firm Clayton Dubilier & Rice for $7 billion in a deal completed this past August. (Focus and its co-founder, Lenny Chang, are co-defendants in the lawsuit.)
Goldman denied the allegations, saying in a statement that it “acted fairly and honestly” in its dealings with KSFB. A Los Angeles court dismissed a lawsuit filed by KSFB last year after Goldman argued that the case should be heard in New York.
The case casts a spotlight on banks’ juggling of complicated duties. It’s an issue that has dogged Goldman before: The firm drew scrutiny last year when it advised Silicon Valley Bank on efforts to raise capital while also buying $21 billion worth of the embattled lender’s debt. That deal that ultimately raised concerns about Silicon Valley Bank’s health.
Though a bank’s handling multiple clients or roles for clients isn’t necessarily improper — so long as there are safeguards in place — it can create awkward relationships and, at the least, the appearance of conflicts.