SEC accuses Goldman Sachs of civil fraud

[Redress]

SEC accuses Goldman Sachs of civil fraud - Yahoo! News

AP 1:45 pm-The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in subprime investments it sold as the housing market was collapsing.

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 other investors.

...

Goldman told investors that a third party, ACA Management LLC, had selected the pools of subprime mortgages it used to create what are known as synthetic collateralized debt obligations. But, the SEC alleges, Goldman misled investors by failing to disclose that Paulson & Co. also played a role in selecting the mortgage pools 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.

Goldman of course denies any wrongdoing. So, this goes somewhat over my head, but I find the topic interesting. Does the government have a solid case here?

 

[Lord Tammerlain]

SEC accuses Goldman Sachs of civil fraud - Yahoo! News



Goldman of course denies any wrongdoing. So, this goes somewhat over my head, but I find the topic interesting. Does the government have a solid case here?

In my opinion (not a legal one mind you)

Yes the government has a case

Goldman was promoting an investment to a group of clients, certainly telling the clients it was going to make them money.

At the same time Goldman was betting those same investments were going to decrease in value. As Goldman set those securities up it had detailed knowledge of the value of the investments and how likely they were going to either make money or lose money.


Overall Goldman was not being an indepdant and honest advisor in the promotion of that investment to its clients, as was its role.



The basic idea here is

I am a Real Estate Agent who sells you a home, I then take out fire insurance on that house (despite me not owning it). I made money selling the home, and should the house catch fire I will make more money. In such a case I have an incentive to ensure the house catches fire to maximize my potential income

 

[winston53660]

In my opinion (not a legal one mind you)

Yes the government has a case

Goldman was promoting an investment to a group of clients, certainly telling the clients it was going to make them money.

At the same time Goldman was betting those same investments were going to decrease in value. As Goldman set those securities up it had detailed knowledge of the value of the investments and how likely they were going to either make money or lose money.


Overall Goldman was not being an indepdant and honest advisor in the promotion of that investment to its clients, as was its role.



The basic idea here is

I am a Real Estate Agent who sells you a home, I then take out fire insurance on that house (despite me not owning it). I made money selling the home, and should the house catch fire I will make more money. In such a case I have an incentive to ensure the house catches fire to maximize my potential income

Cramer on CNBC right now is saying GS was long not short.

 

[reefedjib]

And so enter the Glass-Steagull Act, or rather the overturning thereof allowing the creator of a security (Investment Bank) to stake positions on it (Commercial Bank).

 

[satandog]

Just finished The Big Short: Inside the Doomsday Machine as I saw the news on this and the government absolutely has a case - if the book is at all accurate.

But the issue is that they had no idea what they were doing with mortgage backed securities. Totally concealed the risk of working with them. Created more risk and dumped it on other companies (AIG) and still got burned when it all fell apart.

 

[satandog]

Cramer on CNBC right now is saying GS was long not short.

They were long - that is how they got burned. They had no understanding of the risk around their own products.

Thinking about it - is incompetence a good defense?

People who were short on this stuff at the right time got rich.

 

[donsutherland1]

For those who are interested, the SEC's legal filing can be found at:

http://sec.gov/litigation/complaints/2010/comp-pr2010-59.pdf

 

[winston53660]

They were long - that is how they got burned. They had no understanding of the risk around their own products.

Thinking about it - is incompetence a good defense?

People who were short on this stuff at the right time got rich.

The case hinges on GS going short though.

 

[Erod]

Note that Lehman, which had numerous Obama supporters within its leadership (including Steven Rattner, who was originally going to be the "car czar") seems to be escaping their culpability, much like Fannie and Freddie.

 

[Lord Tammerlain]

The case hinges on GS going short though.

My mistake it was not GS that was short but Paulson

GS&Co marketing materials for ABACUS 2007-AC1 – including the term sheet, flip book and offering memorandum for the CDO – all represented that the reference portfolio of
RMBS underlying the CDO was selected by ACA Management LLC (“ACA”), a third-party
with experience analyzing credit risk in RMBS. Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. (“Paulson”), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process. After participating in the selection of the reference portfolio, Paulson effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (“CDS”) with GS&Co to buy protection on specific layers of the ABACUS 2007-AC1 capital structure. Given its financial short interest, Paulson had an economic incentive to choose RMBS that it expected to experience credit events in the near future. GS&Co did not disclose Paulson’s adverse economic interests or its role in the portfolio selection process in the term sheet, flip book, offering memorandum or other marketing materials provided to investors.

In sum, GS&Co arranged a transaction at Paulson’s request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests, but failed to disclose to investors, as part of the description of the portfolio selection process contained in the marketing materials used to promote the transaction, Paulson’s role in the portfolio selection process or its adverse economic interests.

Paulson helped create the RMBS, with GS knowledge, when Goldman sold the RMBS it knew that Paulson was short the RMBS and did not disclose this fact to the investors that bought the RMBS

 

[satandog]

The case hinges on GS going short though.

Based on the article I don't think so.

In its complaint, the SEC alleges that Goldman failed to tell investors in a collateralized debt obligation that a major hedge fund
that helped choose the portfolio had also placed bets against it.

Which is interesting because based on the little I know Goldman did not care if anyone went short on this. They did not understand the risk and were just happy to take their money.

 

[satandog]

Note that Lehman, which had numerous Obama supporters within its leadership (including Steven Rattner, who was originally going to be the "car czar") seems to be escaping their culpability, much like Fannie and Freddie.

Yet the GOP is linking Obama to Goldman. So how does that fit into you view.

Boehner's office also pointed to Goldman employees having collectively contributed more than almost any other company or institution to Obama during the presidential campaign.

 

[Lord Tammerlain]

Based on the article I don't think so.



Which is interesting because based on the little I know Goldman did not care if anyone went short on this. They did not understand the risk and were just happy to take their money.

I believe that GS is under fire for not disclosing the short position of the RMBS that was set up by Paulson ( who also had the Short position) to the investor who was being advised by GS

 

[TurtleDude]

SEC accuses Goldman Sachs of civil fraud - Yahoo! News



Goldman of course denies any wrongdoing. So, this goes somewhat over my head, but I find the topic interesting. Does the government have a solid case here?

Far more facts would be needed to address your point. However, Goldman gave Obama lots and lots of money. This is interesting. The bonuses that place paid its people a few years ago was well-rather hyperbolic to many.

a girl i went to college, and later law school with earned an MBA and a JD and went to work for GS. I ran into her at our 25th college reunion (she had married a guy from our lawschool and they had two under 11 year old kids).

While most of us were dressed casually she was in a a suit heels etc because she noted she might have to catch the train back to NYC in a moment's notice.

She also racked up about a 1.5 million dollar bonus :mrgreen:

I wouldn't wish her life style on most people though

 

[danarhea]

Goldman Sachs Defrauded Investors, SEC Charges

The SEC has filed charges against Goldman Sachs.

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 collapsing.

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 other investors.

The SEC said the fraud, a blow to the reputation of Wall Street's most powerful firm, was orchestrated in 2007 by a Goldman vice president then in his late 20's. The employee, Fabrice Tourre, has since been promoted to executive director of Goldman Sachs International in London.

Notice that, if someone works for a bankster, and commits fraud, he is promoted. That should tell you a lot about banksters.

Article is here.

 

[hazlnut]

Note that Lehman, which had numerous Obama supporters within its leadership (including Steven Rattner, who was originally going to be the "car czar") seems to be escaping their culpability, much like Fannie and Freddie.

Thank you for your totally uniformed, irrelevant opinion. Go back to watching Glen Beck...

Anyway, here's my thought on this story:

THANK YOU, GOD!

Given the massive power, political and otherwise, GS wields, we needed some divine intervention to bring this scumbags down.

 

[winston53660]

Anyway, here's my thought on this story:

They had a behind the scenes where are they now show on A&E the other day for Animal House. That kid is now a Minister.

 

[Captain America]

They had a behind the scenes where are they now show on A&E the other day for Animal House. That kid is now a Minister.

Hey, if God did miracles like that for me, I'd be a minister too. :rofl

 

[Redress]

Re: Goldman Sachs Defrauded Investors, SEC Charges

The SEC has filed charges against Goldman Sachs.



Notice that, if someone works for a bankster, and commits fraud, he is promoted. That should tell you a lot about banksters.

Article is here.

Nice new avatar Dan.

 

[Chappy]

“The product was new and complex, but the deception and conflicts are old and simple.” — Robert Khuzami, the SEC's enforcement chief†​

The little guy in this world can't buy a break, but he sure can buy a scam. Finally, the S.E.C. is starting to behave like it actually works for us.

Excerpted from “Goldman Sachs Charged With Fraud; SEC Alleges Firm Misled Investors on Securities Linked to Subprime Mortgages; Major Escalation in Showdown With Wall Street” By GREGORY ZUCKERMAN, SUSANNE CRAIG and SERENA NG, The Wall Street Journal, APRIL 17, 2010
[SIZE="+2"]G[/SIZE]oldman Sachs Group Inc.—one of the few Wall Street titans to thrive during the financial crisis—was charged with deceiving clients by selling them mortgage securities secretly designed by a hedge-fund firm run by John Paulson, who made a killing betting on the housing market's collapse.

Goldman vigorously denied the Securities and Exchange Commission's civil charges, setting up the biggest clash between Wall Street and regulators since junk-bond king Drexel Burnham Lambert succumbed to a criminal insider-trading investigation in the 1980s, helping to define the era. …

 

[F107HyperSabr]

SEC accuses Goldman Sachs of civil fraud - Yahoo! News

Goldman of course denies any wrongdoing. So, this goes somewhat over my head, but I find the topic interesting. Does the government have a solid case here? . Does the government have a solid case here?

It appears that they think they do. I think that they have a moral case but whether or not they can prove the charges or not may be dificult to achieve.

I also wondered if the Frds actually have a solid case or are the Feds ( admistration ) just attempting to try Goldman Sacks in the media and make it appear to the public that they actuall tries to punish these guys.

I know that that sounds cynical but WTF better to be cynical than blind.

 

[Chappy]

Oh, I think prosecutors got this case well in hand.

Excerpted from “Goldman Charges May Spur Finance Reform; Analyst Says Fraud Allegations Against 140-Year-Old Firm Will Add Momentum to Dems' Push for Finance Regs Overhaul,” CBS, April 17, 2010
[SIZE="+2"]T[/SIZE]he government alleged Goldman misled investors on a particular portfolio of subprime mortgage securities dubbed "Abacus 2007-AC1." Investors were led to believe the portfolio was selected by an objective third party when, in fact, it was influenced by hedge fund manager John Paulson, whose firm, Paulson and Co., was betting the same portfolio would fail.

"What the government is objecting to is, you can't tell one group of investors 'This is something you ought to buy,' and then tell another group, 'This is something you really ought to sell,'" financial strategist Dick Bove told CBS News.

Goldman took in $15 million in fees for arranging the transaction, while its investors lost over a billion dollars that became profit at Paulson & Co.

 

[F107HyperSabr]

Oh, I think prosecutors got this case well in hand.

I hope that they do have a good case and prevail. Wonder what other dirty little secrets are living under the tarps out of the light of day.

 

[Lord Tammerlain]

I hope that they do have a good case and prevail. Wonder what other dirty little secrets are living under the tarps out of the light of day.

This is not limited to GS, but most of the former investment banks. If this is allowed to go through expect a huge number of civil lawsuits to come forward vs GS, Merril and the other Investment banks.

Time to petty the banksters, as you would petty the gangsters of Chicago circa 1930

 

[obvious Child]

I don't understand how this is fraud.

GS didn't disclose that Paulson went short on the positions they organized, but alone is not fraud. As long as the relevant details about the securities were given, how can GS be rightfully accused of fraud?

As I understand it, and I could be wrong here, you don't have to tell people who's organizing the securities as long as you give them the relevant information about the underlying securities.