Vince Cable's decision to hire Goldman Sachs to advise on pricing Royal Mail for its stock market entry came under fire from MPs, who compared it to giving Great Train Robber Ronnie Biggs a job with security giant Securicor.
Adrian Bailey, chair of the Business select committee, attacked officials' "astonishing" unawareness of the fact that the bank had been finalising a $7.5 million payout after undervaluing the eToys Inc in 1999.
He said: "Appointing Goldman Sachs on a flotation given this court case is a bit like asking Ronnie Biggs to have an appointment at Securicor"
Bailey later suggested the banks had been "conning" the government and accused officials of a "degree of gullibility".
Shareholder Executive chief executive Mark Russell admitted that it had not been considered and was relying on the bank to mention it first.
Goldman Sachs and UBS had valued Royal Mail at £3.3 billion, while its rival JP Morgan valued it as high as £8.5 billion. Goldman Sachs later made £12 million after selling Royal Mail shares at the top of the market, the Independent reported.
Millions of staff and investors are set to share out a £133 million dividend payout on their shares next July, although Royal Mail confirmed it would pay only a final dividend for this financial year. The rise was initially played down by Vince Cable as "irresponsible" and "froth", but the share price has remained over 500p.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said Royal Mail's maiden results since privatisation have had a "warm reception, despite increasingly loud whispers of valuation concerns".