The FT is reporting that Goldie is on the verge of 9 figure settlement with the SEC:
“Goldman Sachs is hoping to avoid the Securities and Exchange Commission’s charge of fraud by reaching a settlement on a lesser offence and agreeing to a fine of hundreds of millions of dollars, according to people familiar with the bank’s negotiating position.
Goldman, which has been accused of civil fraud over a complex mortgage-related security called Abacus, is trying to focus settlement talks with the SEC on the less serious charge of omitting or mis-stating material facts to investors . . . Goldman might pay a fine of $250m and compensate investors by buying out their exposure to the Abacus deal at a cost of $370m”
Forget the settlement, I want to know this: Who was the dipshit lawyer that advised Goldman Sachs to fight this tooth and nail? Was it some executive who simply charged ahead, Dick Fuld style? I’d like to know who totally failed to anticipate the political climate, the public reaction, the prosecutors attitude, and myriad factors that has turned this into a giant disaster. Even if GS were to prevail in court, they have already lost. The reputational damage is already measured in $ billions, and will last years if not decades.
There had to be some decision-making in response to the SEC Wells notice nearly a year ago. The question investors should be asking is: Who is to blame? Who said no to a small settlement and minimal publicity? Who turned an otherwise routine SEC investigation into a giant clusterfuck?
I want names people, names!
And I also want to know: When does that stupid sonuvabitch get fired?
>
Source:
Goldman seeks settlement with SEC
John Gapper and Francesco Guerrera
FT, May 28 2010 00:11
http://www.ft.com/cms/s/0/3cfc666e-69e3-11df-a978-00144feab49a.html
Category: Legal, Really, really bad calls
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.
How could that lawyer have known a year ago that the congress critters and the president himself would suddenly turn on them after all they’ve done for them?
Barry, is it possible it was the same Board of Directors who went along with managements decision to corner the market in subprime lending, and to award bonuses and salaries based on the profits derived from unloading this shit to, shall we say, their more retarded customers? Could it be the same Board who colluded with the ratings agencies to secure triple A ratings on this same stuff? Could it be the same Board who still thinks Lloyd Blankfein is the right man for the job, even though he has admitted publicly that he actually reports to God and not Goldmans Board?
No doubt there is a lawyer involved here. there always is, but they are just maggots feeding of the rotting corpse that is Goldmans Board.
Barry, this is hands down your most poignant post re the Goldman debacle, and you’ve had many of them. Either Sullivan & Cromwell either completely dropped the ball, or the Goldmanites presumed they had enough pull in DC to make this go away and consequently ignored whatever advice was being given. I am going to go with the latter case given the doer of God’s work they have running that enterprise.
It is hubris . When you have reached the top , the only way to go is down.Goldman was striding like an invincible,all-knowing super company leaving its competitors far behind.It had to face the music of public’s ire against the financial industry being its leading actor.
slap on the wrist for GS ??
They can make that money back the next time we get volatility in the markets.
Whoever it was, BR, rest assured they’re presently off to Boris’ homeland w/out Pam Anderson.
GS’s offer should be viewed as a down payment on the final bill for all of this shit AND their management team should be sent to prison. Why should any of them profit, or even make a living, from the seeds of destruction they have sown?
Sometimes God capriciously pinches an optic nerve in order to make people blind to reality
Never mind who was the dipshit lawyer. I want to know why Wall Street banks and major corporations can commit murder, fraud, and treason with relative impunity. GS’s behaviour is an ongoing criminal activity which should be prosecuted under RICO statutes, not SEC guidelines.
How would Congress, the President, and Americans in general react if the Attorney General cut a deal with the Medellin cartel. El Jefe pleads guilty to a lesser charge (such as failure to obtain required licenses for the importation of agricultural goods) and pays a fine of a few billion dollars. Why can’t rapists plead guilty to public lewdness and pay a few thousand bucks to the government so they can walk free.
GS and corporations are legal entities but their action is determined solely by individuals. Lloyd Blankfein needs to spend twenty years in Sing-Sing being traded for packs of smokes.
Rumor is that SEC is insisting on a scalp: Blankfein must go as part of any settlement.
Heh heh. Just saw the irony in what I just wrote. :-)
In other news:
Statement From Under Secretary Blank on Second Estimate of GDP in the First Quarter 2010
The U.S. Commerce Department’s Bureau of Economic Analysis today released the second estimate of gross domestic product (GDP) for the first quarter of 2010. Real GDP growth was revised slightly downward, from 3.2 percent to 3.0 percent at an annual rate.
http://www.commerce.gov/news/press-releases/2010/05/27/statement-under-secretary-blank-second-estimate-gdp-first-quarter-201
Wow BR tell us how you really feel!
100′s of millions…. Lloyd, will be dancing in the streets of Boca Raton!
Let them eat Susan B. Anthony Coins.
After this case has settled, the SEC will, once again, look like the personal bitch of the banks. As a part of the settlement, all SEC officials will be forced to wear assless french maid dresses or assless cowboy outfits all day both on and off duty. The SEC will claim victory.
BR, you can’t blame the lawyer/s. They give advice and lay out the options. What is done with it is up to management. Hundreds of millions of dollars, or even a billion, is a rounding error for Goldman, but is even more trivial for God.
BR, you are right on point.
The lost goodwill will be orders of magnitude greater than any 9 figure settlement with the SEC. Goldman will lose a great amount of market share in its traditional investment banking activities. Government related work will plummet globally and client trust has taken a huge hit.
While their strongest profit centers are in proprietary trading and HFT, these are areas that are prone to additional regulation since it is difficult to argue that they add value to overall economic growth. These are their hedge fund activities, not “God’s work”. This will be particularly problematic for an investment bank that benefits from government-sponsored low capital raising costs.
Rather than just losing a battle, they may also lose the war. I think it was pure arrogance on their part.
Wait, he’s doing the work of God? Boy, God must really hate widows and orphans.
But the fines involved are (very) small potatoes for GS & the reputational risk consequences are de minimus (short term market vagaries aside) when market participants’ reaction is essentially one of “Who else are you going to use?” If (a very word) the NY AG can & does successfully criminally prosecute on this deal & or similar ones, then one might be talking about real, cascaded reputational & litigation consequences. Otherwise, your outrage at GS’s PR spin/management capabilities is, though justified, quite disproportionate.
Where’s Transor Z? He is a lawyer and better able to comment, but my understanding is they almost have to fight the charge rather than roll over and settle due to the volume of CDO business Goldman and the industry at large does.
The reason for this is, if they roll over on this suit regarding this deal, then there are hundreds of deals lined up after this that they have lawsuit exposure to and would go through the exact same process for. If this would have been a quick $30 million settlement then that could potentially have been repeated over and over for GS. I think it is also somewhat of a common corporate stance for one company to get in front and bite the bullet in one case at one firm before the lawsuits start flying for all firms.
It’s like in Sorkin’s book Too Big Too Fail where JPM just decided to swallow BSC for 10 per share because the problems BSC was causing a spillover effect in the market and their counterparties (competing firms) costing them more money than the 8 premium over the 2 market price. Same thought process with this type of lawsuit as not fighting it originally would have a spillover affect to other firms and probably lead to greater problems for GS if they gave up and then the SEC train stops at JPM, MS, BAC, C, CS, UBS for nearly identical deals (speaking only on the Magnetar-type hedge fund CDS/CDO trade disclosure issue and not Fab’s alleged email misrepresentations).
Fighting it out initially and ironing out the legal details with the SEC and maintaining their stance in a move towards settlement may have allowed GS to clarify a lot of laws/rules/interpretations that could save their ass on all the other deals they did. IF that is the “why” in the decision to fight at first, the lawyer may have saved them time and money. I would think fighting was a business decision rather than PR decision.
IF that’s not why, then multiple law firms complete blew it. I saw on Bloomberg that GS hired a who’s who of top notch legal firms. Not even the normal crew. It was crazy. They hired almost every firm. I would assume those guys knew what they were doing.
As I said, maybe Transor Z can chime in. I’m just a B+ corporate law student but I did stay at a Holiday Inn Express last year…
@BR
“Who was the dipshit lawyer that advised Goldman Sachs to fight this tooth and nail? ”
You are dead wrong. This was not decided by the lawyers. I bet you they probably suggested settlement. Me thinks that GS management being the “masters of the universe” decided that who the f^&$&^* is the SEC to tells us any thing. We will strike the SEC with bolts of lighting from our home in the Olympus …
“Let them eat Susan B. Anthony Coins.”–Mark Down, above
I wonder if any will appreciate the true depth of that rejoinder..(?)
http://www.thefreedictionary.com/rejoinder
it’s f****** brilliant~
mbelardes,
you may care for this line of Inquiry
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=origins+of+Corporate+Personhood+19th+Century+U.S.+Jurisprudence
You wanna know who the sons of bitches were….? I’ll tell you who they were…. Robert Rubin, Hank Paulsen, Jon Corzine, Tim Geithner, et al….
The usual “douche-bags” and their arrogant, narcissistic, sycophant lackeys…. That’s who….
Who cares…….? They’re pathetic and miserable, and I don’t have to tell them that, because they already know it…..
Best regards,
Econolicious
sorry, it was me.
I suspect what’s really important here is that SEC is allowing GS to get away with not copping to a felony. Two felony convictions on certain specified crimes and RICO comes to bear, and I’m guessing that’s all that really matters … to either side, unfortunately.
Who was the dipshit lawyer that advised Goldman Sachs to fight this tooth and nail?
I would be very surprised if any of Goldman’s lawyers, either inside or outside, gave that kind of advice. Most of the big firm lawyers I know tend to be very risk adverse – their advice, accordingly, tends to be very nuanced and hedged. This is especially true for cases that have a lot of money at stake or are otherwise high profile.
My guess is that teams of lawyers examined the case from all angles and presented top Goldman executives with their analysis and recommendations. Based on my experience, the lawyers probably arrived at some tentative conclusions regarding the legal and factual strength of SEC’s claims, but even these conclusions would be qualified. For example, the lawyers would note that the investigation was still early and ongoing, so that any conclusions would change as and when new facts were discovered. Likewise, the attorneys would probably note what aspects of the claims involve novel or unsettled areas of the law.
In addition, the lawyers would probably explain that the Goldman’s strategy would have to take into account factors other than the strictly legal merit of the case, including business and public relations factors. I am sure they would have noted that the case would attract a lot of public attention and could be a source of significant negative publicity for Goldman.
All of this advice would be embodied in various legal memorandum and discussed among lawyers and executives at Goldman. The discussions were probably lengthy and tedious. It would not have been a hasty decision.
Ultimately, it would have been a judgment call by Goldman’s executives, after weighing all of the various factors – legal merit as well as business and publicity considerations.
There is no issue of admitting to a felony. The claims were brought by the SEC, which can only bring civil claims, not criminal charges.
Also, the FT article is a bit confusing when it talks about “reaching a settlement on a lesser offence.” Standard procedure for SEC cases – as in almos all civil settlements – is for parties neither to admit nor deny the allegations. I am sure that I have never seen any party admitting wrongdoing when settling an SEC case.
Goldman Sucks is going private. They pay this petty cash fine, buy back enough stock if they haven’t already, take the fucker private, and their preferred customers stay with them.
Be like catching Dahmer only to find out the jury is a buncha serial killer child molesters.
This barn door was opened when they went public and all the consequences that flow from that will never be paid for by those caused them. Lord Blankfein just shoved it up out asses again with his purchase of a $26 million dollar “apartment”. And he’ll do it as long as he’s allowed to breathe.
From the FT: “Regulatory experts say that companies charged with fraud often seek a settlement on a lesser charge but it is unclear whether the SEC would agree to downgrade such a high-profile case.”
From the SEC:
http://www.cfo.com/blogs/index.cfm/l_detail/14498740?f=rsspage
You want to see settlements.
I want to see perp walks.
I agree fully with those stating that it was (and is) GS mgmt who decided to fight the SEC.
No outside counsel with this type of gold-plated client would ever tell them to “fight.” That’s insanity and raises the specter of unpredictable courtroom litigation. No way. Sullivan & Cromwell earns enormous fees in the backroom — and that’s not only where they like it, it’s also where they can get the best deal for their client.
The exec management at GS are hard cases. They think — and actually believe — that they can take on Uncle Sam and win.
I had posted a while back that Lloyd’s first call should have been to Geoffrey Bible, the former Chairman of Philip Morris. PM decided to fight, too. They lost.
Today, instead of being the Fortune 5 company they were, Philip Morris is 3 separate companies: Kraft, PM USA and Philip Morris International. The two tobacco companies face billions in litigation risk. The US operation moved its headquarters from Park Avenue in NYC, to Richmond, Virginia. Thousands have been laid off over the past 5 years. The tobacco operation does not advertise their products in the US. Remember the Marlboro Man? When was the last time you saw an ad for this brand?
A precisely similar situation to GS? No.
But it’s a near perfect example of what can happen to a fabulously wealthy industry, with $millions spent annually in lobbying support, and paying $billions more in taxes to the states and the fed — when public opinion goes the wrong way.
.
@mbelardes:
How the fuck do I know?
Glad to be of service.
Maybe there is a different view. Perhaps GS knows exactly what it’s doing. Perhaps they fought this suit to create a visible public struggle as the mob drags it to the gallows. To avoid its head being chopped off GS bargains with the mob to pay a large fine. The mob is mollified, having extracted a pound of flesh. GS forever gets to wring its hands and cry about how it suffered a huge fine – nine whole figures. You can just hear it now:
“We paid the price, we have atoned for our sins, we have paid our debt to society. We will henceforth be upright citizens and endeavor to do God’s work for the benefit of the country.”
By the way, who is the current Managing Executive of the SEC’s Division of Enforcement, where did he work before that, and how old is he? What were his qualifications as a civil prosecutor? And when exactly was he hired and when was his department created? Just askin’.
[Hint: see wikipedia for Adam Storch]
When Lord Blankfein is making such statements as “We’re doing God’s work…,” I think that legal counsel are not to blame for the decision to fight the SEC.
It is pretty clear from both behavior and statements that Goldman’s senior management have arrogance, greed and hubris enough to be fully culpable in this situation.
I coudn’t agree more and opined in an earlier debate that the longer term reputational damage was the largest problem for Goldie and who should, therefore settle asap.
This solution, however, simply penalises GS shareholders. Why not make Blankfein and other Goldie Bonus recipients pay the settlement amount?
I have to agree w/ you. How no one thought this had the makings of a criminal complaint is beyond a good many people even GS’s friends.
My biggest complaint however remains Warren Buffet’s actions. To go on TV and not pitch a fit over non disclosure of a WELLS notice is something he would call any company he didn’t have an investment in criminal.
Hubris, all the way. IMHO it wasn’t the attorney’s that made the call or even the recommendation unless they were just reflecting the corporate culture and feelings. When you’re doing God’s work why even think about admitting an error, paying a fine never. Blank fein does have Buffett defending him now, which has killed any hope I ever had that this economic/government/bank mess would ever be sorted out.
Power corrupts and absolute power corrupts absolutely, pretty much sums up this little deal.
[[The claims were brought by the SEC, which can only bring civil claims, not criminal charges. ]] — slowLearner
I know that — sorry I wasn’t clear. There’s no indication the SEC ever referred the matter to DOJ for a criminal investigation, which is what should have happened.
Robert M: You’re right about Buffett. And now, after he turned down a polite invitation from the Financial Crisis Inquiry Commission, it has subpoenaed him. Grab your seats and popcorn, people: I don’t think the commission cares so much about Moody’s, per se; I think it cares about Buffett.