Free Enterprise Action Fund Requests Review of Goldman Sachs’ Environmental Policy

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Mutual fund says Goldman CEO may have had a conflict of interest and breached his fiduciary duty to shareholders by adopting the policy.

Action Fund Management LLC (AFM), investment adviser to the Free Enterprise Action Fund (, requested that Goldman Sachs’ (NYSE: GS) Audit and Corporate Governance Committees review the firm’s recently announced Environmental Policy.

“We are concerned that CEO Henry Paulson may have had a material conflict of interest and management may have breached its fiduciary duty to shareholders by adopting the policy,” said AFM’s Steve Milloy.

“We believe the policy, if actually implemented, will not only harm Goldman’s shareholders and clients,” added AFM’s Tom Borelli, “but will also aid environmental activists in depriving poverty-stricken populations around the world of the financial services and resources necessary for crucial economic development.”

The Free Enterprise Action Fund (FEAF) is a mutual fund seeking to provide investors with financial returns while defending and advocating for the American system of free enterprise. The FEAF owns less than one percent of the outstanding shares of Goldman Sachs.

The FEAF requested that the Audit Committee and Corporate Governance and Nominating Committee conduct an immediate review of Goldman’s recently announced Environmental Policy (EP) and report the results to shareholders.

AFM’s letter to Goldman's Audit and Corporate Governance Committees states, in part:

“We are concerned that the EP: (1) will harm shareholders and clients; (2) was adopted without adequate or customary due diligence concerning its scientific and economic bases, or its costs and benefits to shareholders and Goldman clients; (3) was promoted by CEO Henry Paulson, who may have a conflict-of-interest that inappropriately influenced Goldman’s decision-making process; (4) represents a surrender to demands from external environmental pressure groups, a capitulation that breaches management’s fiduciary duty to its shareholders and violates Goldman’s stated Business Principles; and (5) is counter-productive in that it will actually do more harm than good to the environment and to poverty-stricken populations in developing nations.”

CEO Paulson is also chairman of the Nature Conservancy, an environmental activist group. “While the Paulson-approved EP is consistent with the Nature Conservancy’s environmental activist agenda, it is not necessarily consistent with the interests of Goldman’s shareholders and clients,” said Milloy. “At a minimum, Paulson should have recused himself from the decision-making process and safeguards should have been implemented to ensure that undue influence was not directly or indirectly exercised in adopting the policy.”

The environmental activist group Rainforest Action Network has been pressuring Goldman to adopt a policy similar to the EP since 2004 and immediately took credit for its adoption when it was announced on November 22, 2005. (1-2)

“Corporate management should ensure business decisions are based on thorough analyzes and appropriate concern for shareholders and clients – not on external political or activist pressures, “ said AFM’s Tom Borelli. “Making decisions simply to please activists, we believe, constitutes a breach of management’s fiduciary duty to its shareholders and undermines our system of free enterprise.”

“The first of Goldman’s Business Principles states that, ‘Our clients' interests always come first,’ noted Milloy. “But the EP appears to give environmentalists precedence at Goldman – that is, unless, management can show it has conducted adequate due diligence demonstrating the EP prioritizes client interests. We eagerly await Goldman’s response.” he added.

The Free Enterprise Action Fund seeks long-term capital appreciation through investment and advocacy that promote the American system of free enterprise. An investor should consider the fund's investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information about the Free Enterprise Action Fund can be found in the fund's prospectus. To obtain a prospectus, please call 1-800-766-3960 or visit Please read the prospectus carefully before investing.

Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. The Free Enterprise Action Fund is a new fund with limited investment history and there is no guarantee that it will achieve its investment objectives.

The Free Enterprise Action Fund is advised by Action Fund Management, LLC., which receives a fee for its services, and is distributed by BISYS Fund Services Limited Partnership, which is not affiliated with Action Fund Management, LLC.


1.    Rainforest Action Network. Letter to Goldman Sachs (March 10, 2004).

2.    Rainforest Action Network, Media Release (November 22, 2005).

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Steven Milloy
Action Fund Management, LLC
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