Sex suit does a job on optimism

A federal judge in Manhattan sounded so pleasantly optimistic when he approved a $54 million settlement in a sex discrimination class action against Morgan Stanley.

He called the agreement “a watershed in safeguarding and protecting the rights of women on Wall Street.”

That was six years ago.

Wednesday, three women, formerly a managing director, a vice president and an associate at Goldman Sachs, sued Wall Street’s richest and most powerful firm for sex discrimination. If their complaints are true, these women weren’t touched by the “watershed” settlement.

Their suit blames an “unchecked gender bias that pervades Goldman Sachs’s corporate culture” for underpaying and failing to promote women at the bank.

They want to turn their case into a class action to include hundreds of women who held bank positions starting as long ago as 2002.

Goldman denies it discriminates. “We make extraordinary efforts to recruit, develop and retain outstanding women professionals,” says Goldman spokesman Lucas van Praag.

Goldman has lots of problems these days. It got past a humiliating grilling before Congress and in July settled a Securities and Exchange Commission suit for $550 million. Now it faces this legal problem.

It’s hardly a new one for Wall Street, which is why it’s surprising. The allegations in the Goldman suit, while low on old-style raunch, resonate with anyone who read about the claims in the 1990s against Smith Barney, Merrill Lynch & Co. and other firms in the 2002 book “Tales from the Boom-Boom Room” by my colleague Susan Antilla.

Wasn’t Wall Street supposed to correct that? Financial executives seem to think they fixed it a long time ago.

“There is nothing that holds back women or any other minority group” David Komansky, then Merrill Lynch’s chairman, declared at the firm’s annual meeting in 2003, the New York Times reported.

“It’s time to get on with life and either compete or not,” Komansky was quoted as saying.

And yet in lawsuit after lawsuit, women who sue Wall Street firms say they do compete, quite successfully, only to find that their bosses ignore the objective evidence of their performance and find ways to promote and pay more to male counterparts who perform the same or worse than they do.

What’s a girl to do?

At Goldman, Cristina Chen-Oster became a vice president in the convertible bond department. As a saleswoman, she was generating more revenue than a male counterpart of the same rank and job but who was paid 50 percent more than she was for the fiscal year ended in 1997, the suit says.

The pattern kept repeating, year after year. In 2001, that same man was made her supervisor. This was especially galling because, her suit alleges, he “had previously undermined and denigrated Chen-Oster in front of others,” a practice that didn’t stop with his promotion.

She was eventually shifted to a sales group where business opportunities were rarer and compensation lower.

At the same time, she saw a man promoted to managing director and then partner who had accosted her following an after-hours bank celebration at a New York strip club and tried to coerce her into sex, while she fought him off. The incident was reported to supervisors, but she felt Goldman treated her more shabbily afterwards while the firm kept promoting him.

The other two plaintiffs say their days at Goldman weren’t what they had expected, either.

Lisa Parisi, who worked for Goldman in New York and then Atlanta, was promoted to managing director in the Value Group after two years at the bank. As a portfolio manager, she consistently outperformed others in her group, meeting or exceeding all benchmarks, she asserts.

Assets she managed went from $4 billion in 2001 to more than $40 billion in 2007. A male counterpart with similar portfolio growth saw his compensation double over those six years while hers dropped, the suit says.

Shanna Orlich spent a year as an associate in New York, hoping to work as a trader but kept on as an analyst. Plenty of Wall Street novices get turned down as traders. But watching male classmates get ahead while she was told to make photocopies for a senior male analyst and answer his wife’s phone calls made it seem that sex bias was at work.

Nor does it help that bank golfing outings were essentially male only, the suit says.

It’s true that some of these allegations are dated, and possible that they are exaggerated or that Goldman has cleaned up its act. But the numbers show that the higher the management level at Goldman, the smaller the percentage of women.

If the women get class status and win a big settlement or jury award, then some other judge can proclaim it a new day on Wall Street.

Maybe it will be. Maybe it won’t. There’s such a thing as too much optimism.

Ann Woolner is a Bloomberg News columnist