Summary:

Looking to side step scrutiny, Goldman Sachs is changing the terms of its recent transaction with Facebook. Under the initial deal, Goldman…

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photo: Corbis / Brooks Kraft

Looking to side step scrutiny, Goldman Sachs is changing the terms of its recent transaction with Facebook. Under the initial deal, Goldman Sachs created a “special purpose vehicle” to allow many of its high-end clients to invest up to $1.5 billion in the social network and still be treated as one shareholder. That, however, drew broad accusations that the company was trying to do an end-run under SEC regulations that mandate that private companies with more than 500 investors have to disclose their finances.

The bank now says, however, that it will only allow “offshore” investors to invest in Facebook, a move that presumably will allow it to avoid some regulatory questions, according to a WSJ report.

Goldman Sachs tells the WSJ that it won’t let U.S. customers put money into the social network because “the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law.” Goldman Sachs’ pitches to clients — which included some previously undisclosed Facebook financials — were repeatedly leaked, although the bank doesn’t specify that’s the media attention it’s concerned about. The WSJ article, meanwhile, strongly implies that it’s in fact some sort of “regulatory vulnerability” that drove the decision.

The irony is that in its attempt to side step scrutiny, Goldman Sachs and Facebook might actually now get more of it — at least from the public. Facebook was built on its users’ being open with their information so it hasn’t looked good that it has wanted to be so private with its financials. And, the fact that one of its biggest investors now wants to turn to “offshore” clients to avoid attention looks even worse.

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