SEC Accuses Goldman Sachs of Civil Fraud

SEC Goldman Sachs Charged
FILE – In this June 20, 2007 file photo, Treasury Secretary Henry Paulson testifies on Capitol Hill in Washington, before a House Financial Services Committee hearing on the state of the international financial system. The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering Friday, April 16, 2010. (AP Photo/Manuel Balce Ceneta, file)


WASHINGTON (AP) — The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering.

The Securities and Exchange Commission said in a civil complaint Friday that Goldman failed to disclose that one of its clients helped create — and then bet against — subprime mortgage securities that Goldman sold to investors.

Investors in the mortgage securities lost more than $1 billion, the SEC said. The agency is seeking to recoup profits reaped on the deal.

Goldman Sachs denied the allegations. In a statement, it called the SEC’s charges “completely unfounded in law and fact” and said it will contest them.

The charges come as lawmakers seek to crack down on Wall Street practices that helped cause the financial crisis. Among proposals Congress is weighing are tougher rules for complex investments like those involved in the alleged Goldman fraud.

The Goldman client implicated in the fraud is one of the world’s largest hedge funds, Paulson & Co., which paid Goldman roughly $15 million for structuring the deals in 2007.

Goldman Sachs shares fell more than 13 percent after the SEC announcement, which also caused shares of other financial companies to sink. The Dow Jones industrial average fell more than 140 points in midday trading.

The civil lawsuit filed by the SEC in federal court in Manhattan was the government’s most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession. The SEC’s enforcement chief said the agency is investigating a broad range of practices related to the crisis.

The agency also charged a Goldman vice president, Fabrice Tourre, 31, who it said was principally responsible for devising the deal and marketing the securities.

The SEC is seeking unspecified fines and restitution from Goldman Sachs and Tourre.

Asked why the SEC did not also pursue a case against Paulson, Enforcement Director Robert Khuzami said: “It was Goldman that made the representations to investors. Paulson did not.”

Goldman told investors that a third party, ACA Management LLC, had selected the underlying mortgages in the investment. But, the SEC alleges, Goldman misled investors by failing to disclose that Paulson & Co. also played a role in selecting the mortgages and stood to profit from their decline in value.

“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” Khuzami said in a statement.

The SEC charges come after Goldman Sachs denied last week it bet against clients by selling them mortgage-backed securities while reducing its own exposure to them.

In an annual letter to shareholders, Goldman said it began reducing its exposure to the U.S. mortgage market in late 2006. It said it did so by selling mortgage investments or buying credit default swaps. The swaps are a form of insurance that pays out if the value of the underlying asset declines.

Those hedges, also known as short positions, served Goldman well. As the housing market began cratering and losses piled up for other big banks, Goldman suffered less damage. That led to criticism that the bank benefited at the expense of clients who bought mortgage-backed securities that became toxic. Goldman denied that.

“Our short positions were not a ‘bet against our clients,'” Goldman said in the letter. “Rather, they served to offset our long positions. Our goal was, and is, to be in a position to make markets for our clients while managing our risk within prescribed limits.”

In the letter, Goldman also rejected claims that it profited from the mortgage market meltdown.

By MARCY GORDON
April 16, 2010

Source: AP

This is how ‘doing God’s work‘ looks like:

Looting Main Street: How the nation’s biggest banks are ripping off American cities with the same predatory deals that brought down Greece

Goldman Sachs Squeezes Hedge Funds in $110 Billion ‘Collateral Arbitrage’

Goldman Sucks

Banksters Bet Greece Defaults on Debt They Helped Hide

Secret AIG Document Shows That Goldman Sachs Minted Most Toxic CDOs

Here Comes The Next Bubble: Carbon Trading

Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt

The CDS Puppetmaster Behind It All And The Ever Increasing Parallels Between AIG And Greece

The Illuminati Banksters: JPMorgan vs. Goldman Sachs

Secret Banking Cabal Emerges From AIG Shadows

America’s Impending Master Class Dictatorship!

Ron Paul on FOX NEWS: Wall Street Bailout FRAUD

The No.1 Trend Forecaster Gerald Celente: Financial Mafia Controlling US and Wall Street

How Goldman Sachs Made Tens Of Billions From The Economic Collapse Of America In Four Easy Steps

Goldman Sachs: Investors Could Only Lose in Offshore Deals

Goldman Sachs: Betting Against All of Us

Chinese firm says won’t pay Goldman Sachs on options losses!

Goldman Sachs Banksters Arming Themselves With Pistols Against Public

Goldman Sachs CEO Lloyd Blankfein: I’m doing ‘God’s work’

Wall Street Banksters To Pay $30 Billion Record Bonuses In 2009

Absolute Perfection: Goldman Sachs Loses Money On Just One Trading Day In Q3

Goldman Sachs: Trading Perfection And Statistical Improbabilities

Goldman Sachs Takes On New Role: Taking Away People’s Homes

CIT Bankruptcy Filing Expected in Days; $2.3 Billion Taxpayer Money to Be Wiped Out; Goldman Sachs Receives $285 Million In Termination Fees

New York Fed’s Secret Choice to Pay for AIG Swaps Squandered Billions of Taxpayer Money:

…and remember who got the bailout money back then:
AIG Discloses Counterparties as Obama, Cuomo Assail Bonuses:

This time the bailout money from the U.S. taxpayer went to:
Goldman Sachs led beneficiaries, with $12.9 billion, followed by SocGen, France’s No. 3 bank, with $11.9 billion, and Deutsche Bank, Germany’s biggest lender, with $11.8 billion. Barclays Plc received $8.5 billion from AIG, Merrill Lynch & Co. got $6.8 billion, Bank of America Corp. got $5.2 billion and UBS AG got $5 billion.

US taxpayers pay Goldman Sachs for Swaps on Nonexistent Bonds

The Goldman Sachs Bankster Casino – Where The Hell Is The Outrage?

US: Utah approved a $27.3 million incentive package to keep Goldman Sachs, bringing the total amount to $47.3 million

On the Edge with Max Keiser (09/04/09): The Banksters have free reign in America

Goldman Sachs Loses Grip on Its Doomsday Machine

Goldman Sachs Code Theft BOMBSHELL?

Goldman Sachs Market Manipulation Dominance at Risk by Theft

New Secrecy Rule Lets Goldman Sachs Control Stock Prices Unmolested by Public Scrutiny

Goldman Sachs hires law firm to shut blogger’s site

Leave a Comment