Fascinating (to read) story on the inside workings at Goldman Sachs here.

The story is too long to post here but here is the summary.

(1) Dragon Systems develops a great piece of voice recognition technology.
(2) They want more funds to grow and approach Goldman Sachs for advice on an M&A (Mergers & Acquisitions) deal.
(3) Goldman assigns a team of four investment bankers to help Dragon Systems find a suitable buyer. The fee for this brokerage service is $5 Million.
(4) The team identifies a potential buyer L&H.
(5) The team of i bankers play truant and do not perform due diligence.
(6) L&H meanwhile cooks their books and pretends to be a great acquirer of Dragon Systems.
(7) Goldman, itself, is thinking of investing in L&H, however, some of its equity analysts actually DO some checking and discover that L&H is COOKING ITS BOOKS.
(8) Despite (7), the team of 4 i bankers do not raise any red flags about L&H's buyout of Dragon Systems.
(9) An all cash deal gets changed to an all stock deal right when L&H's stock is trading at a high.
(10) Right after the deal, L&H's stocks plummet and Dragon Systems has neither cash nor paper money.
(11) The founders of Dragon Systems are currently suing Goldman for failing and essentially killing the company.

I have always believed that many of these freshly minted MBAs from the Harvards/Stanfords/IIMs who end up working on Wall Street have very little sense of ethics. Financial engineering seems like alchemy - you get something from nothing. But, it only appears so. There is no free lunch. Many of these i banking firms do not really help the economy. The strength of the economy emerges from brick-and-mortar companies - be it technology or manufacturing.

This story just corroborates that view.