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WHITE PLAINS-In response to charges leveled against Barry Sternlicht, chief executive officer of Starwood Hotels & Resorts Worldwide Inc. that he received preferential access to IPOs managed by Goldman Sachs, the company issued a statement saying the deals were above board.

The House Financial Services Committee issued a report on Wednesday, Oct. 2, charging that Goldman Sachs offered IPOs to numerous corporate executives who were clients of the investment bank. Sternlicht was listed among a list of corporate executives who, the committee charged, were investment banking clients of Goldman Sachs that were given preferential access and received IPO shares. Contacted by Globest.com, a spokesperson for the House Financial Services Committee, refused to release specific allegations against Sternlicht. She said that Sternlicht, and a number of other executives, purchased at least 20 Goldman Sachs IPOs and/or received a single allocation of greater than 20,000 shares. The committee also stated that Credit Suisse First Boston and Citigroup/Salomon Smith Barney also allocated IPOs to some of its investment banking clients.

It should be noted that the report did not specify what, if any, profit Sternlicht made from those IPO purchases. Among the other executives named by the committee to have been investment banking clients of Goldman Sachs who received IPO shares were: former Enron executives Kenneth Lay, Robert Belfer and Herbert Winokur, Jr., William Clay Ford of Ford Motor Co., as well as several executives from WorldCom.

The committee named a host of corporate officers and directors who allegedly flipped IPO shares for huge profits. Among those named in the report were executives from eBay, Global Crossing and Yahoo. Starwood’s Sternlicht was not included on that list.

A spokesman for Starwood issued the following statement in response to the House Financial Services Committee charges, “Barry has had a relationship with a broker in the private client services group at Goldman back in Chicago since the late (19)80s — long before Starwood Hotels was formed. All of the IPO offerings received by Barry were based solely on that long term relationship and all (company) banking decisions have been made based on the recommendations of the CFO and Treasurer.”

He adds that Starwood’s primary banking firms are Deutsche Bank and JPMorgan Chase.

Goldman Sachs also issued a statement refuting the House committee’s charges. “We believe this is an egregious distortion of facts. The suggestion that Goldman Sachs was involved in spinning or other inappropriate practices around IPO allocation is simply wrong,” the company stated. “Investment bankers play no role in how shares are allocated and banking clients did not receive favored treatment.”

Stanley Turkel, a New York-based hotel consultant, says that he does not believe the committee’s charges will have an impact on Starwood hotel business.

“Who knows how the public will view the charges?” he asked, adding that any impact on the firm’s hotel business will depend on how much media attention the charges against Sternlicht receives in the future.

Capital Markets Subcommittee chairman Richard H. Baker, commented on the questionable IPO dealings by executives and Goldman Sachs by saying, “These initial public offerings seemed to be anything but public. A small circle of preferred clients were given vast access by the investment banks to IPO shares and reaped large profits on the sale of these shares. What is most disturbing is that their profits were gained at the expense of the average investor whose only option was to buy the shares at the oftentimes inflated aftermarket price. It is clear that significant changes need to be made to ensure there is equity and transparency in the IPO process.”

The House Financial Services Committee examined whether shares of IPOs were offered by the investment banking firms in the late 1990s as an inducement or reward for investment banking business.

Committee chairman Michael G. Oxley stated on the report’s release, “There is no equity in the equities market. I call on every Wall Street firm to show respect for America’s individual investors by reforming these corrupt practices immediately.”

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