Here’s a little “inside baseball” stuff.

Sam Antar, the former CFO of Crazy Eddies who now specializes in training investigators how to uncover White Collar Fraud, noted the significance of a Friday SEC Complaint:

“The SEC filed the lawsuit on Friday without giving Goldman the heads up.

When a company receives a surprise subpoena or a lawsuit on a Friday, it is known as the “kiss of death” from the SEC. (I received my first SEC subpoena on a Friday afternoon, back in the day). It is meant to ruin your weekend plans (yes, the SEC can get personal in its own way), since your lawyers usually don’t work weekends.

Goldman compounded its problem by putting out a misleading press release contesting the SEC’s charges. That press release can be the basis for later 10b-5 violations, if the SEC wins its case against Goldman.

Goldman should not engage in a public debate on this issue, if they want to avoid being baited by the SEC.

Fascinating stuff . . .

>

UPDATE: April 19, 2010 6:21am

The WSJ is reporting that GS was blindsided by lawsuit

Category: Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

78 Responses to “Goldman Sachs Gets the SEC Kiss of Death”

  1. DasKapitalist says:

    Interesting. At the risk of citing only 2 data points, it seems that the SEC is better at hindsight years after the fact (this case) than foresight (Madoff). Is this the general case, I wonder?

  2. hgordon says:

    Thank you Sam. Great reading !

    I love the disclosure at the end -

    “I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980′s. I committed my crimes, simply because I could.

    If it weren’t for the efforts of the FBI, SEC, Postal Inspector’s Office, US Attorney’s Office, and class action plaintiff’s lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

    I do not own Goldman Sachs securities short or long. However, it did scam Goldman Sachs analyst Richard Balter about Crazy Eddie’s financial reports during my criminal days as the CFO of the company.

    My research on Goldman Sachs is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I personally believe that some people at Goldman Sachs may end up joining me in hell. “

  3. snapshot says:

    http://baselinescenario.com/2010/04/18/john-paulson-needs-a-good-lawyer/#more-7214

    Simon Johnson says “John Paulson needs a Good Lawyer.” There may be the potential for conspiracy to commit a fraud.

  4. ubnutsagain says:

    DasKapitalist Says:

    Interesting. At the risk of citing only 2 data points, it seems that the SEC is better at hindsight years after the fact (this case) than foresight (Madoff). Is this the general case, I wonder?
    ____________________

    Foresight is not a strength of Big Government. Ironically, that weakness is a powerful motivator of Big Government poltician’s need for Power and Control over their subjects.

  5. bobabouey says:

    Another former SEC fraudster had a different view… I don’t think you need to be a psychiatrist to see that poor Mr. Henry Blodget is desperately projecting a similar excuse to what he had – that if the client is purportedly sophisticated, fraud by the perpetratror just isn’t that relevant, its just part of the job…

    http://www.businessinsider.com/henry-blodget-hold-on-the-secs-first-major-fraud-allegation-against-goldman-seems-very-weak-2010-4

    His earlier post even had a Bove like moment, starting with the comment “We haven’t had time to review the SEC’s fraud allegations against Goldman Sachs (GS) and 31-year-old senior vice president, Fabrice Tourre, in detail yet, but we’ve scanned them. Read more: http://www.businessinsider.com/henry-blodget-fraud-fallout-fabrice-tourre-is-toast-goldman-will-be-fine-2010-4#ixzz0lSlekbYE

    “Fabrice is toast goldman will be fine”, a little more projecting there Mr. Blodget?

  6. HEHEHE says:

    Please. I’m sure Goldman’s inside and outside legal staff works 24/7, seven days a week. They are tied at the hip with Sullivan & Cromwell so tightly it’s joked that people don’t know if Goldman is the Investment Bank that Sullivan built or Sullivan is the Law Firm that Goldman built. Don’t get me wrong, I am sure the actual date of the complaint’s release may have took them by surprise, and certainly made a change to a lot of people’s weekend plans, but they did recieve the Wells Notice last year so they knew at some point this might happen. I am still surprised that they did not disclose that Wells Notice though, thats a shock. Most outside counsel would advise disclosing it for the simple purpose of avoiding unnecessary litigation costs down the road re class actions. Either advice was ignored, wasn’t sought, or they thought they had enough pull in DC to make this thing disappear.

  7. bobabouey says:

    I was a corporate lawyer at one of the big 10 NY law firms (before moving to investment banking and finally out of both). Even if you are used to working extremely long hours, it still sucks when something new and nasty turns up on a Friday. So in my view the Friday timing still suggests signalling by the SEC that GS is no longer the govt.’s bestest buddy, even if Sam extrapolates from a field where weekend legal work was probably less common.

    In addition to Goldman’s failure to specifically disclose the Wells notice (they had more general risk factors describing that they participated in ongoing investigations, etc.), it appears that Fabrice Tourre failed to update his FINRA registration accordingly. http://www.reuters.com/article/idUSTRE63F5IK20100416

  8. hgordon says:

    Will we later look back on Friday, April 16, 2010, as the day the Wall Street bubble burst ?

  9. mister_x says:

    The “we lost 90 mil too, so we did nothing wrong” schtick seemed very hollow and amateurish to me too. Glad to see someone agrees. Good stuff from Sam Antar.

  10. SamAntar says:

    HGordon: Antar never found God on the footsteps of the courthouse. Instead, Simpson whipped my ass! He will whip Goldman Sachs’s rear end, too!

  11. riffraff says:

    And then there is this:

    INSIDER TRANSACTIONS REPORTED – LAST TWO YEARS

    http://finance.yahoo.com/q/it?s=gs

  12. johnborchers says:

    By issuing the statement on the market friday Goldman basically opened up the window for shareholder suits as I understand 10b-5. Without this statement I don’t see the public being involved. Somewhat dumb on the part of Goldman’s legal department.

    “In order for Rule 10b-5 to be invoked, there must be intentional fraud or deceit by the party charged with the violation. Furthermore, for a private party to recover damages, they must be able to show that they were injured because they relied on the fraudulent claim. If the defendant had publicly made a fraudulent statement, every investor could sue if it could be shown that the statement affected the market as a whole – this is the “fraud on the market” theory enunciated by the Supreme Court in Basic Inc. v. Levinson, 485 U.S. 224 (1988). This “fraud on the market” presumption of the plaintiff’s reliance upon the deceit is only available in situations (like in Basic) where the security is traded on a well organized, and presumably efficient, market.”

  13. bobabouey says:

    johnborchers -

    I think the more relevant 10b-5 claims is by the purchasers of the CDOs. It is pretty clear they can show they were injured because of the fraud in marketing the CDOs. In fact, the immediate decline in the Abacus series at issue in the current SEC complaint is probably why the initial suit was based on a 2007 series Abacus, rather than an earlier and older one. Fraud on the market is more relevant for broad lawsuits by public shareholders, where they have a harder time pointing to direct damages suffered based on a purchase of specific securities based on specific representations. I.e. if a public company omits material statements or touts, and the market declines when that omitted or misstated statement is revealed, the case law says there is a presumption of reliance on the statement in buying / continuing to hold during the period at issue, and that the public market decline is the damage, even if you don’t actually sell the stock during that period. Or at least thats my general recollection.

    Now, for the public securities, the potential relevance of fraud on the market might be Goldman’s non-disclosure of the specific Wells Notice received in connection with the current complaint, which was apparantly six months ago. http://www.businessweek.com/news/2010-04-16/goldman-sachs-said-to-have-been-warned-of-sec-suit-update1-.html

  14. dss says:

    The reason why this news might be bad for the markets is that the stock market hates uncertainty. If the information continues to ooze out over a number of weeks, this could be very bad.

  15. I’ve always hated that cliche — mostly because it is wrong.

    The stock market is about discounting the future — guesstimating what future revenues, growth, earnings might be — by definition, they are unknown and uncertain.

    Hence, the market is discounting an uncertain future.

    When you say the market hates uncertainty, you are saying it hates the future. And as a mechanism that discounts the future, that all but means it hates itself.

    Besides, if we did not have uncertainty, we would not have huge buying and selling opportunities. When everyone is certain the world is going to end, or are certain that prices only go up, you create opportunity. That goodness for uncertainty!

    OK, enough tautology for a Sunday morn.

  16. rktbrkr says:

    Cuomo is pursuing individuals at the bank (BAC) while the U.S. Securities and Exchange Commission has declined to do so. The suit is being filed under the Martin Act, a New York securities law that permits both civil and criminal penalties.

    Cuomo said he coordinated efforts with the SEC. “Our case will bring individuals to justice and will make a point to people that this is a very serious matter,”

    The Martin Act, New York General Business Law article 23-A, sections 352-353,[1] [2] is a 1921 piece of legislation in New York that gives extraordinary powers and discretion to an attorney general fighting financial fraud. People called in for questioning during Martin Act investigations do not have a right to counsel or a right against self-incrimination.[dubious – discuss] The act’s powers exceed those given any regulator in any other U.S. state.[3]

    http://www.businessweek.com/news/2010-02-04/martin-act-suit-against-ken-lewis-announced-by-cuomo-update1-.html

  17. rktbrkr says:

    dss…There will be more oozing on Wall street than there was on Molokai

    More cell phone calls this weekend than there were the weekend leading to the GS bailout, whoops I mean the AIG bailout!

    Hmmm, if Blankfein or other GS sharpies get charged criminally does the conversation expand beyond the current scope? I remember a active blogger who claimed he was threatened into silence by GS lawyers threatening him with libel

  18. cognos says:

    So, why are we loosely equating “Crazy Eddie”, a fraudulent business with GS?

    It seems highly likely that this is ALL the govt has after 9 months of investigation. A single transaction, that made GS $25m (!!!). This transaction was between ACA- Paulson – Bank buyers. Simply brokered by GS. Heavy disclosures were made. All sides had lawyers, modelers, analysts. The structures were rated AAA.

    So sad that the SEC thinks this accusatory drama accomplishes anything.

    We had a HOUSING BUBBLE! That’s what drove the losses ( or gains for Paulson). Not fraud or missing regulators. You cannot “regulate away” losses.

  19. Uchicagoman says:

    Barry and fellow TBPers,

    There is an excellent description of the shady underworld of how wall street and hedge funds (in particular Magnetar) made these types of bets.

    http://www.thisamericanlife.org/radio-archives/episode/405/inside-job

    Seems like a lot of folks could be in trouble as the greater public wises up to such things.

    Cheers.

  20. hgordon says:

    @cognos -

    Dream on …

    There’s no freakin’ way anyone is going to stand up for GS once this sh*tstorm gets rolling, and it doesn’t matter whether or not the SEC case is marginal. All of the rats are diving for cover and lawsuits will be rattling through the system for the next 10 years. As I stated above, we likely will look back upon Friday, April 16, 2010, as the day the Wall Street bubble burst.

  21. fully diluted says:

    “we likely will look back upon Friday, April 16, 2010, as the day the Wall Street bubble burst.”

    Wouldn’t make sense … the govt just bailed out the financial community, why would they just turn around and try to destroy it? Most likely this will be a little slap on the hand for GS (as Barrons mentions, if GS loses the case, whatever monetary punishment comes its way will be manageable).

  22. RC says:

    @cognos,
    When the internet bubble burst, they put Bernie Ebbers, the founder of WorlCom in prison long enough to die while incarcerated for a damage that is WAY WAY less than the housing bubble created. You expect people to have no reaction for this collapse !!!

  23. Uchicagoman says:

    Whoops, you speedy commenters were all ready all over that!

    Sorry, I was behind on keeping up with the keen voice of the community!

  24. Onlooker from Troy says:

    Barry

    I also have come to hate that cliche’, “the stock market hates uncertainty.” It hates uncertainty when it’s going down, but shrugs it off and even thrives on it when it’s going up.

    After all, the proverbial wall of worry is all about uncertainty. I don’t know how this one got so entrenched in the conventional wisdom, because it’s so easily disprovable.

    This is but one thing that I’ve learned over the last couple of years. It’s something that is spouted by the mainstream press, etc., and is a dangerous bit of market “wisdom”, IMO.

  25. HEHEHE says:

    Another angle to consider is inter-agency power struggles re reform. Dodd, if there ever was a politician owned by Wall Street he be the man, wants to end the SEC so to speak and role their function into the FED. This may be the SEC, especially the longtimers, giving him their collective one finger salute. Not that the SEC isn’t ineffectual but putting the FED in charge would be a nightmare the way those guys obfuscate the truth every chance they get.

  26. cognos says:

    You guys dont seem to make a key separation:

    CrazyEddie NEVER made any money.

    WorldCom/Enron had HUGE losses that outweighed profits. It was not “regulatory action” or “lawsuits” that did them in… it was losses. I seem to recall the MCI one was some totally fictitious $250M+ account Ebbers told his accounts to book. Just a lie.

    Bear, Lehman, Fannie/Freddie, AIG — all done in by REAL LOSSES to actual economic exposures that caused a cascading crisis that nearly took out the banking system. (Again, housing bubble).

    There are NO MORE huge losses… in fact, there are HUGE GAINS. Banks, including GS, will now start reporting their best Qs ever. GS will post its 2nd best Q1 ever… and the last 6 months will be the most profitable period ever. In light of the bad publicity they will continue to make modest cuts to compensation % and produce a 2010 that will be the best year ever for the firm (above $25/shr in EPS).

    It does not seem this minor SEC action (again, $25M in fees on a single transaction, rated AAA by both rating agencies, after 9 months of investigation) will stop the basic “buy the dips” trade. I hope we get 1150… I’ll be levered into that.

    Dont make the “2008 trade” today… its the wrong trade.

  27. HarryWanger says:

    But won’t the market go up cuz it’ll be worried and we all know the market loves to climb a wall of worry. After all it does look six months into the future, blah, blah, blah.

    It’s all bullshit. When the market does something, there’s always an old time mantra as to why. Personally the “markets look 6 months ahead” is my favorite. After all, when the DOW was at 14k it was certainly looking ahead six months to nothing but blue skies!

  28. NormanB says:

    Guilty until proven innocent? Come on guys, keep an open and intelligent mind.

    Special packaging up securities groups is what Goldman does all of the time. Paulson wanted a package, Goldman built it, disclosed the contents to prospective buyers and some dummy bit. Buffett did the same thing with his big option writing package.

    Seems to me that what the SEC is charging is that Goldman did not disclose Paulson’s intent or thinking to potential buyers. Duh!! Under what rule do they have to do this? If someone is buying this package then by definition they know someone else has the oppostie position from what they have. Every single trade ever made has these same two parties.

    Further, to think that Goldman doesn’t utilize CYA systems is nuts. They are still the smartest guys in the room.

    Plus, this indictment is very obviously an over-reach by government to get a financial regulation package passed. Whether like Ritholtz we harbor a hatred for Goldman and thier like or not we must, as good citizens, realize that they aren’t guilty until proven so. As for me, my bets are on Goldman to wipe the SEC’s butts. SAVE GOLDMAN!!!

  29. crunched says:

    Personally, I have no problem taking a short term hit to my portfolio, I’d even embrace a 50% correction if it’s in the name of cleaning up this kind of scum. We’ll never make it to a ‘real’ bull market until it is.

  30. bobabouey says:

    NormanB says: “Seems to me that what the SEC is charging is that Goldman did not disclose Paulson’s intent or thinking to potential buyers. Duh!! Under what rule do they have to do this?”

    Consider the parallel of other leveraged investments. When a bank makes a loan to a private equity buyer, they obviously have a due diligence obligations, but the reputation of the private equity purchaser is also critical. When a bank makes a loan to a homeowner, the good ones want to make sure there is an equity investor with real skin in the game too, and until recently, diligence on the equity owner was also part of the loan process.

    Here, Paulson / Magnetar were the equity portion of the CDOs. The failure to disclose that the equity owner actually plans to short the instrument, and may even have structured the investment to be more at risk to help the undisclosed shortside, if proven, is fraud. Pure and simple.

    You can put all the disclosure you want about investors relying on their own diligence, and the fact that the party structuring the investment may also as part of their overall practice advise on and take adverse positions to the investment, but a fundamental core deceit such as alleged by the SEC is fraud.

    “Caveat emptor” is not a defense to fraud.

  31. Julia Chestnut says:

    Dude, his lawyers don’t work weekends? How do I get that gig?

    My large client gets a complaint dropped on Friday and I’m going to spend the entire weekend on several large and painful conference calls. Filing deadlines wait for no man. In fact, a small number of people at the client are going to be miserable, but a large number of people at the law firm will be spending Sunday pulling case law, making travel arrangements to the client headquarters, and generally gearing up for battle.

    What hurts is when you get the bill for it.

    Of course, in Goldman’s case, couldn’t happen to a more deserving bunch. ;)

  32. johnborchers says:

    So whats the trade on GS? Long it after it’s initial fall Monday morning? That’s what I’m going to try selling some put spreads.

  33. CTX says:

    Do you agree with Antar? Is he a financial authority? what are his credentials, few years in Allenwood? I hope that you are not going to have ‘legal experts’ quoted on your site who got their paralegal certficates while in prison

  34. mknowles says:

    GOLDMAN SACKS-USA, GOLDMAN SACKS-GREECE, GOLDMAN SACKS-ETC. – yawn…. wake me up when I can post it in the past tense. I watched Harry Markopolos interviewed on BookTV on CSPAN this morning, he’s got the right ideas for reform, imo.

  35. DL says:

    I would be very surprised if this case ever goes to trial.

    I assume that politics is driving this as much as anything else.

    First and foremost, there’s the financial regulation legislation in the Senate. The timing of this SEC charge suggests that’s a major factor. Then of course there’s the midterm elections.

    At some point, there’s going to be an out-of-court settlement, the timing of which will be set to optimize Obama’s political advantage.

  36. bsneath says:

    My read is that Goldman Sachs misled investors into thinking that Paulson was long when in fact he was (and they knew he was) short. This would be the basis for violating SEC Rules.

    Wall Street needs to clean up its act and the first step towards that process is for them to move from anger and denial to acceptance. Friday was a big step in the right direction. There is a real possibility that the flood gates will now open as the honest traders (as much of an oxymoron as that may be) feel more confident to go public. Also many of the dishonest traders will attempt to cover their butts by pointing fingers at and exposing others.

  37. cognos says:

    The final absurdity…

    The AAA tranches of these structured ABS deals… which went from 100 (at 5-15 bps spread) down to as low as 20 pts on 100. Are coming back strong… they have AT LEAST doubled from the bottom and are back in the 45-80 range.

    I bet you they wind up to be worth 80-90-100 in almost ALL cases.

    So the real losses were just M-T-M trading losses. Regulators F-ed the banks by forcing them to “sell” or calling them “bankrupt” in a liquidity crisis. Illiquid assets marked fown 50-80%… then back up 100 to 400%. Nice!

    So, if the AAA part of the product ends up paying principal back in full (again, at 10 bps) or even 90/1000… can GS really be fraudulently packing it with toxic assets? It even starts to make the rating agencies look good.

    The real problem then, was just accepting 6 bps spreads. And the regulators “m-t-m” manifesto. It wasnt really that the AAA-part was “toxic” at all. Ha!

  38. crunched says:

    Doesn’t matter what they’re worth now or then… They were structured with a high anticipation of failure and Goldman forgot to pass that info along.

  39. lerwin says:

    What I’ve always hated is “the market hates…,” as if the market were some organic entity. Which it is not. We do the same thing with corporations, which are not organic either. Except for Goldman which is organic in the bloodsucking cephalopodic sense

  40. SamAntar says:

    bsneath “My read is that Goldman Sachs misled investors into thinking that Paulson was long when in fact he was (and they knew he was) short. This would be the basis for violating SEC Rules. ”

    It was a simple nondisclsoure issue on a single transaction and GS blew it by escalating.

    Sam

  41. SamAntar says:

    CTX:

    Credentials here http://whitecollarfraud.blogspot.com/p/speaking-appearances.html. Please read list of clients

  42. bsneath says:

    This case casts a pall over the hedge fund industry even though Paulson’s hedge fund was not implicated by the SEC. That individuals and organizations in the finance sector have been allowed to manipulate the composition of financial assets in order to accentuate financial gains at the expense of others will not go unnoticed. It smells to some extent of collusion. I suspect we will see more calls for regulation of this industry and laws to prevent similar occurrences.

  43. flipspiceland says:

    No heads up, eh?

    Right.

    And chickens have lips.

  44. MikeG says:

    Shorter Goldman Sachs: “You f*cked up — you trusted us!”
    America is Flounder Nation.

  45. NormanB says:

    bobabouey says :

    “Paulson plans to short the instrument”. Plans to? Is that a violation? Why would the buyer care to know what Paulson does afterwards. As far as they know at that time Paulson is a dope. Until the deal worked in his favor he held no maestro standing If he shorts maybe he’s making two mistakes. If Paulson did tell Goldman that he plans to short it maybe he’s just faking out Goldman and he’d double-cross Goldman. He did not have a contract to short, maybe or maybe not he had a plan. Intent, preceived intent or possible intent are not contracts. We can all change our minds from what we say we will do. Revisit Obama’s promises if you doubt that.

  46. bsneath says:

    SamAntar Says: It was a simple nondisclsoure issue on a single transaction and GS blew it by escalating.

    I understand. It is caused by power and arrogance. Those who hold positions of power become accustomed to wielding it around and squashing those who oppose them. They oftentimes fail to see the inflection points when their power has waned and thus they elevate issues and create even more problems for themselves in the process.

    They oftentimes fail to understand that while they were wielding their power, they were creating numerous enemies. But as long as they retained their power, these enemies were too timid to fight back and in fact would even go so far as to continue to feign a friendly status. However, once it becomes clear their power is lost, their enemies will attack with a vengeance. I have seen it happen and it can get ugly very rapidly.

    Whether or not Goldman’s prestige falls to the point where their enemies feel safe to attack, I wouldn’t hazard a guess. But it would not surprise me to see a plethora of civil suits against GS and the other investment bankers by pension funds, trusts, State AGs, local gov’ts. etc.

    I suspect you are correct that at the end of the day the fines paid to the SEC may pale against the legal costs incurred in defending against civil lawsuits.

  47. [...] Barry Ritholtz, this bit by Sam Antar about how Goldman’s reaction to the SEC complaint filed Friday may [...]

  48. call me ahab says:

    DL-

    dude- I see it differently- they may settle- but there may be other surprises around the bend-also- don’t forget the civil suits from pension funds and large investors that will come raining down on GS-

    looks like it could get ugly- and my guess- more TBTF banks will be charged-

    I am sure GS wasn’t the only one-

    and BR-

    I have to side w/ dss regarding uncertainty- once it was clear the the Fed had the backs of the TBTF’s- and ZIRP and QE were locked in w/ a vise grip- the market never looked back

  49. catman says:

    BR – Just saw your limerick at NC. Goldman will never again be golden slacks (per Cramer). Giant Squid is here to stay. If the shoes fit…

  50. DL says:

    Ahab @ 6:02

    I’m not saying that people should buy GS tomorrow morning.

    My interest is more in what the S&P500 is going to do over the next week or so, and secondarily in how XLF will perform relative to SPY over the next several weeks.

  51. Robespierre says:

    cognos Says:

    “We had a HOUSING BUBBLE! That’s what drove the losses ( or gains for Paulson). Not fraud or missing regulators. You cannot “regulate away” losses.”

    Fraud never! then again may be bribes? (allegedly) of course JPMorgan knew nothing about these “gifts”.
    Now Cognos how much did your investments on GS dropped last Friday? Go ahead load up on GS but remember state AGs and other countries AGs are beginning to pile on… Even if this is a PR from the administration it probably will not be settle until after the Nov. elections or reformed is passed…

    JPMorgan Ends SEC Alabama Swap Probe for $722 Million (Update4)
    The settlement comes a week after Larry Langford, the former president of the Jefferson County Commission and Birmingham mayor, was convicted for accepting $235,000 in designer clothes, Rolex watches and cash from an Alabama banker who JPMorgan paid almost $3 million to help arrange the swaps associated with a refinancing of the county’s sewer debt.

  52. dss says:

    BR,

    I agree with you regarding normal market conditions, earnings, etc., and the MSM does overuse this cliche to pretend that they are wise observers of the market, but I think in this instance until more of the story unfolds there will be uncertainty.

    This is not just about finding out whether Apple’s earnings or the unemployment numbers are bte.

    In the end, they might settle, or this thing might be the tip of the iceberg regarding lawsuits and investigations. The point is no one knows as of yet what will unfold. (If history is any judge, this might be much ado about nothing.)

  53. jeg3 says:

    There is an Old Irish Saying:

    “Your Mouth Can Break Your Nose”

  54. cognos says:

    Another point…

    This is WAY less of an issue than the General Re (i.e. Berkshire Hathaway) deal to manipulate earnings with AIG.

    Its just a petty point of disclosure on 1 of 10,000 securities deals done by Goldman in 2007 on which they made $25M. Maybe they should pay a fine, maybe disclosure rules should be clarified. But there is no systematic evidence of fraud or lack of disclosure.

    The fact that some people SELL and other BUY a security… is not generally for disclosure. (“Who wants to buy $1B Qualcomm?… Steve Cohen is selling”)

    One of the MAIN POINTS of having a broker-dealer / I-bank intermediary is ANONYMITY!

  55. CitizenWhy says:

    Goldman Sachs – Too Big To Be Honest

    When you’re as big as GS and as connected, fraud is just part of the job.

    Calling itself an investment bak is itself a fraud – it’s just a big trading operation. And the Fed should take away its phony change to a commercial bank: it does not make business loans. you can thank the CEO Paulson (a trader) for the change from investment bank to trading house.

    Let the damn thing die!

  56. The Curmudgeon says:

    This may be an insignificant deal to Goldman, but the investors lost a billion. Just a rounding error to those doing God’s work, I suppose.

    Assuming the complaint has its facts correct (an arguable assumption), Goldman most certainly defrauded the investors in the security. It’s hard to see how Paulson and Co didn’t do so as well.

    It should be noted that the investor that lost the biggest money was ABN Amro, a dutch bank that was purchased a short while after the real estate market top. In other words, the aggrieved party here is a foreign entity that was trying to pour money into the American real estate market. Think that might have something to do with why the SEC brought charges?

    And the phrase “the markets hate uncertainty” is often misunderstood. Of course the markets crave the uncertainty that comes with discounting risk and predicting the future. That’s the whole point of a fucking casino, eh? But I believe the phrase refers to risks that are nearly impossible to properly discount: The black swan, left field risks–a nuclear attack, a presidential assassination, a decline in housing prices in the US (I’m joking about that one–it should have seen that coming for miles)–something that wasn’t properly discounted into the prices of its products, but now must very rapidly be priced in. It simply means that until the new reality is properly discounted, there will be quite a bit of volatility in prices. And traders love volatility, so perhaps all this stuff with Goldman will make for some sweet profits for the traders, and loads of money for the clearinghouses (i.e., Goldman, et al.).

  57. emmanuel117 says:

    That 8-K issue should hurt them quite a bit.

  58. Andy T says:

    Well, I guess if the ex-CFO of Crazy Eddies says so, this must be the truth?

  59. Andy T says:

    For the right clients, white collar attorneys are always available on the weekend. Nobody at GS is “stewing over the weekend” waiting to talk to their attorney on this deal. The timing of this has more to do with creating the right buzz/headlines for the news cycle and Sunday talk shows…. As many others have asserted, the timing might also have something do with the hugely negative IG report on the SEC/Standford.

    The ex-CFO of Crazy Eddies providing source material for TBP? C’mon Barry…your audience is better than this.

  60. Mannwich says:

    Simon Johnson thinks John Paulson should be charged.

    “[Goldman] designed something intentionally complex that’s basically a mechanism of transferring money from you to John Paulson. John Paulson, it is true, has not been charged with anything. But he was involved in designing the security. For all we know right now it was probably his idea and if he walks away without being charged, it shows how broken our system is.”

    http://www.zerohedge.com/article/simon-johnson-if-john-paulson-avoids-charges-it-shows-how-broken-our-system

  61. diogeron says:

    Let’s see how this plays out, but it seems clear there was evidence for a cause of action on the part of the SEC.

    Insofar as DL’s comment about it being “political” and designed to play to Obama’s advantage, I would only point out that, one way or the other, given the actions of GS, either action or inaction by the SEC might be perceived as “political”, but the risk of public perception shouldn’t drive the train one way or the other.

  62. SamAntar says:

    “The ex-CFO of Crazy Eddies providing source material for TBP? C’mon Barry…your audience is better than this.”

    It takes one to know one. Only evil understands evil.

  63. SamAntar says:

    bsneath Says:
    “I understand. It is caused by power and arrogance. ”

    I agree.

    If any person (whether evil or not) suceeds by “power and arrogance” why expect them to change their ways? To understand criminal behavior, take morality out of the equation.

  64. cheese says:

    “The Kiss of Death”…………I wonder if that costs extra? I’ll have to ask…….

  65. SamAntar says:

    “bsneath Says:
    Wall Street needs to clean up its act ”

    When hell freezes over. Since I have a one way ticket there, I’ll let let you know when it happens.

  66. SamAntar says:

    emmanuel117 Says:

    That 8-K issue should hurt them quite a bit.

    The blood hounds and ambulance chasers in the class action bar are having a wet dream this weekend over Goldman Sachs’s response. GS couldn’t have picked a slimier crew as enemies. Not that there is anything wrong with it.

  67. SamAntar says:

    Citizen why days:

    “Calling itself an investment bak is itself a fraud – it’s just a big trading operation.”

    I respectfully disagree. It’s a high end bookie joint masquarading as an investment bank. The same applies to the rest of our casino economy.

  68. SamAntar says:

    snapshot Says:

    April 18th, 2010 at 10:27 am
    http://baselinescenario.com/2010/04/18/john-paulson-needs-a-good-lawyer/#more-7214

    Simon Johnson says “John Paulson needs a Good Lawyer.” There may be the potential for conspiracy to commit a fraud

    My response:
    A conspiracy count is every prosecutors wet dream. Any lawyer will tell you that a conspiracy count allows the use of otherwise excludable heresay evidence.

  69. bsneath says:

    Bonus Payments – roll with the punch
    Insider Trading by Director at NY Fed – slip & dodge
    AIG Bailouts – bob & weave
    Front Running Trades – counter punch
    Hiding Greek Deficits – rope-a-dope
    SEC Fraud Charges – uppercut straight to the chin

  70. SamAntar says:

    bobabouey Says:

    April 18th, 2010 at 11:04 am
    I was a corporate lawyer at one of the big 10 NY law firms (before moving to investment banking and finally out of both).

    My response:

    Crazy Eddie’s corporate counsel was Paul Weiss. We used to joke around that they turn black and white paper into green paper.

  71. DC says:

    S&P futures are down this evening.

    This is to be expected. It’s the same market mechanics as when word leaks that the FBI is about to raid the Jersey docks. Cigarettes and DVD players get rapid markdowns.

    If “the market” valued honesty and integrity, investors might actually be encouraged by signs that a long-overdue cleanup is underway and bid prices up.

    Wall Street? Honesty? Integrity? Fuggeddaboutit.

  72. SamAntar says:

    Thank you to everyone for all your comments con and pro. I read them all, even if I don’t respond. May God bless you all. Good night!

  73. Heresy says:

    CDOs are basically an insurance product that the government exempted from regulation and then paid off the uncovered bets. The government is guilty, but it is an instrument of TBTF corporatism. Whether that is more disgusting than the Tea Party is a difficult question.

  74. riffraff says:

    A little charcoal lighter for the vampire squid bar-b-que:

    “Top Goldman Leaders Said to Have Overseen Mortgage Unit”

    http://www.nytimes.com/2010/04/19/business/19goldman.html?hp

  75. Leo Sands says:

    Read:

    “The SEC vs. Goldman”
    http://online.wsj.com/article/SB10001424052702303491304575188352960427106.html

    But at least SEC has the evidence in hands to file the case in court.

  76. Firm Contends It Was Blindsided by Lawsuit
    http://online.wsj.com/article/SB10001424052748703594404575192460560075600.html

    Goldman Sachs Group Inc. officials said they knew as far back as August 2008 that regulators were examining controversial mortgage securities created by the firm but were stunned by the bombshell civil fraud suit lodged against it Friday, with most having learned about it from news reports.

    Firms typically get a chance to settle such suits, but not in this case, Goldman said. The Wall Street giant said it was alerted to the probe in the summer of 2008 and was warned that it might face a suit in July 2009. It says it then responded in detail to the Securities Exchange Commission’s inquiry in September, but heard nothing back from the government until Friday’s unveiling of the civil suit. The SEC usually notifies firms ahead of a lawsuit as a courtesy to give them a chance for a last-ditch settlement or to prepare for the public fallout.

    The move showed a combative streak from the SEC, which has been under mounting pressure after letting slip through its fingers early probes into the Ponzi scheme of Bernard Madoff and the alleged fraud of Texas financier R. Allen Stanford.

    The case, SEC v. Goldman Sachs & Co. and Fabrice Tourre, sets the stage for what could become the signature lawsuit from the financial-crisis era. It comes at a time when the Obama administration is trying to move through Congress a bill to overhaul financial regulations in the wake of the crisis—legislation that would likely affect the regulation of products used in the Goldman deal.

  77. HEHEHE says:

    “Goldman lawyers advised Lehman
    The US law firm supporting Goldman Sachs against fraud allegations was Lehman Brothers’ legal adviser as it crashed into bankruptcy two years ago. ”

    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7604725/Goldman-lawyers-advised-Lehman.html

    Hahaha, makes me chuckle. Well with all the class action lawsuits GS will be facing looks like Sullivan may take back #1 in the AmLaw 100.

  78. DeDude says:

    So the SEC is getting nasty – how nice ;-)