NEW YORK (Reuters) - Under normal circumstances, Goldman Sachs Group Inc GS.N might be afforded a moment of gloating as it struts toward what could be a banner earnings announcement just nine months after being roiled by Wall Street's worse crisis since the Great Depression.

Flags fly outside of the Goldman Sachs headquarters building in the financial district of New York May 8, 2009. REUTERS/Lucas Jackson

But these aren’t ordinary times for the biggest U.S. investment bank, which lately has faced a torrent of unwanted publicity stemming from employee theft allegations and an unflattering spread in Rolling Stone magazine.

Now Goldman, expected to announced second-quarter earnings on Tuesday, finds itself in a no-win situation.

If earnings are too good critics may lambaste it for ramping up risk too much and embracing a hedge fund-like model that could make it vulnerable to big market swings.

If they fall short, investors may accuse the firm of failing to live up to its reputation for being more aggressive and intelligent than its rivals.

"They are between a rock and a hard place," said Walter Todd, a portfolio manager with Greenwood Capital Associates, which owns shares of rival Morgan Stanley MS.N.

And, regardless of the results, critics may fall back on the old “Government Sachs” refrain, a nod to the number of former Goldman defectors now working in government, and claiming special treatment.

From a public relations standpoint, Todd said that leaves Goldman asking questions familiar to the oil industry as it contended with windfall profit taxes amid spiking gas prices.

“How well do they really want to do?” Todd asked.

Analysts polled by Thomson Reuters are expecting Goldman to report net income for common shareholders of $3.54 a share.

That is down from a pro-forma $4.58 a year earlier, but would best a surprisingly strong first quarter in which Goldman reported net income of $3.39 per share.

Strong trading income and improving equity underwriting markets are expected to bolster the results, offsetting a one-time charge of $425 million related to payback of loans Goldman took from the U.S. Treasury’s Troubled Asset Relief Program, or TARP.

In a noisy second quarter, Goldman repaid $10 billion in TARP loans, while raising $8.9 billion in equity, debt and asset sales to win its way out of the government program.

Getting the approval to exit TARP was considered a key step from getting out from under the thumb of the U.S. government, which has taken the industry to task for lavish compensation.

If Goldman reports strong earnings, it will confront another public relations challenge in how it translates profits to compensation for employees. Last month, the Observer newspaper reported that Goldman employees in London were briefed on the company’s performance and told to expect record bonuses if the year finished strongly. Goldman has denied such a briefing ever took place.

“PAY THEIR PEOPLE”

Banc of America Securities-Merrill Lynch analysts said in a research note this week that Goldman could set aside as much as $17.9 billion for compensation this year, more than the $10.9 billion last year, but still below the $20.19 billion set aside in 2007. Using Goldman’s first-quarter headcount, that comes out to $642,000 per employee, based on the research estimates.

“Does the strong earnings and the employee pay-out mean it is back to the future and that they are wheeling and dealing and engaging in higher risk activities, as was true just a few years ago?” said Lawrence White, a professor at New York University’s Stern School of Business. “We don’t really know.”

To be sure, there is more than a touch of jealousy to the chorus of ill-will toward Goldman, which rivals have in recent years waited -- so far in vein -- to break its long earnings hot streak.

The bank’s defenders say Goldman is simply being upbraided for its success and argue that the firm has Wall Street’s most sophisticated risk management procedures in place -- systems that put it in a stronger position than most rivals to ride out last fall’s turmoil.

And the fact is that better-than-expected earnings would boost Goldman’s share price, already up 73 percent so far this year, which would be good news for its investors and partners.

“In the financial realm, they are smartest guys around,” said Bill Hackney, chief investment officer of Atlanta Capital Management Co, which owns Goldman shares. “I doubt there’s any behind the scenes conspiracy among Goldman executives to cause them to have an unfair advantage in the market. This harping is just sort of sour grapes.”

Sour grapes or not, Goldman, despite the fact that the Treasury Department is no longer run by one of its former CEOs and that a retired Goldman chairman has been forced out of key post at the New York Federal Reserve, continues to raise hackles among many.

A scathing article in Rolling Stone that accused the bank of having a key role in various market bubbles stretching back to the 1920s and stoked outrage on the Daily Kos and other blogs.

The arrest of one of its former employees earlier this week for allegedly stealing computer codes that were the key to hefty trading profits at the firm also stirred up chatter on various financial blogs where little love is lost for the firm.

The case is not expected to impact earnings but the firm, famously publicity-averse, may have little chance of retreating from the spotlight anytime soon.