Goldman Sachs Chief Executive Lloyd Blankfein has hired Reid Weingarten, a high-profile Washington defense attorney whose past clients include a former Enron accounting officer, according to a government source familiar with the matter.

Blankfein, 56, is in his sixth year at the helm of the largest U.S. investment bank, which has spent two years fending off accusations of conflicts of interest and fraud.

The move to retain Weingarten comes as investigations of Goldman and its role in the 2007-2009 financial crisis continue.

The Senate's Permanent Subcommittee on Investigations (PSI) in April released a scathing report that criticized Goldman for exploiting clients by unloading subprime loan exposure onto unsuspecting clients in 2006 and 2007, and concluded that its top executives misled Congress during testimony in 2010.

The company has said it disagreed with many of the report's conclusions, but took seriously the issues addressed.

Goldman said in a statement on Monday: As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department's inquiry into certain matters raised in the PSI report hired counsel at the outset.

Goldman shares fell sharply shortly after Reuters reported Weingarten's hiring, closing down 4.7 percent at $106.51, their lowest level since March 2009. They slipped further in after-hours trade to $105.64.

Why do you bring in someone like that? said the source, who was not authorized to speak publicly, about Weingarten. It says one thing: that they're taking it seriously.

Blankfein has not been charged in any civil or criminal case, and it was not immediately clear why he hired Weingarten.

Weingarten did not respond to requests for comment.

This was the last thing that Goldman Sachs or any institutions in the sector needed, said Peter Kenny, managing director of Knight Capital in Jersey City, NJ. There is zero tolerance for risk or perceived risk right now.

HIGH-PROFILE CLIENTS

A partner with Steptoe & Johnson LLP, Weingarten has represented a wide array of clients in criminal cases. They include former WorldCom Inc chief Bernard Ebbers, who was later convicted, and former Enron accounting officer Richard Causey, who pleaded guilty in exchange for a 5 to 7-year prison term.

In May, Weingarten won the acquittal of former GlaxoSmithKline lawyer Lauren Stevens on charges of lying and obstructing a probe into the company's marketing practices.

I'm used to these monstrously difficult cases where everybody hates my clients, Weingarten told AmericanLawyer.com in May, although he described Stevens as a beloved figure.

Controversy has continued to swirl around Goldman Sachs and Blankfein in the aftermath of the credit crisis in which Goldman was accused of favoring some clients over other investors and of sometimes trading against the interest of clients.

The U.S. Securities and Exchange Commission scored a $550 million settlement against the bank in a fraud lawsuit in July 2010, but other investigations continue.

In June, New York prosecutors subpoenaed the bank to explain some of its actions in the run-up to the financial crisis. It is also the target of probes by the Justice Department, the New York Attorney General and the Securities and Exchange Commission.

It was not immediately clear what charges, if any, Blankfein could face personally.

One former federal prosecutor, who was not authorized to speak publicly, said Blankfein may have hired outside counsel after receiving a request from investigators for documents or other information.

The Senate report raised questions about inconsistencies between testimony from Blankfein and other Goldman executives to Congress and emails unearthed in the Senate investigation. The subcommittee's chairman, Senator Carl Levin, has said the question of whether Blankfein and others committed perjury is up to the relevant federal agencies.

The former prosecutor cautioned that perjury cases were difficult to prove, adding that prosecutors would not bring charges unless they had a rock solid case.

Goldman earlier in August lowered its estimate for future legal costs to $2 billion from its $2.7 billion estimate three months earlier. It said it expects such costs to remain high for the foreseeable future.

(Reporting by Andrea Shalal-Esa; Additional reporting by Carlyn Kolker; Editing by Tim Dobbyn)