SEC Charges Golman Sachs with Fraud


US charges Goldman Sachs with fraud

By John Byrne
Friday, April 16th, 2010 -- 11:00 am
The Securities and Exchange Commission has charged investment banking titan Goldman Sachs with civil fraud over a pre-packaged mortgage instrument they say was designed to fail.

Goldman Sachs created the derivative -- called Abacus 2007-AC1 -- in response to a request from a hedge fund manager who predicted that the housing market would collapse and wanted to bet against it. The trader, John Paulson, later earned $3.7 billion for his wager.

According to the New York Times, which first revealed details of the Abacus case, the instrument was among 25 Goldman created so that clients could bet against the housing market:

As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars.

Goldman let Mr. Paulson select mortgage bonds that he wanted to bet against — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.

But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to default. Goldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

Apparently, they weren't.

Fabrice Tourre, a vice president at Goldman who helped design and market Abacus, was also named in the SEC suit.

84 percent of Abacus' mortgage bonds would be downgraded within five months of their sale. By the end of 2007, Paulson's credit hedge fund soared 590 percent, and Goldman's clients lost billions.

Goldman reportedly targeted specific mortgage bonds at Paulson's request that Paulson felt were most likely to lose their golden credit ratings, which would trigger a payout for his firm.

Goldman did not immediately comment on the suit. The company's shares fell more than 10 percent on the news.

Shareholder recently sued firm for huge bonus payouts

In January, a lawsuit filed against the investment bank by a shareholder alleged that the company spent more money on corporate bonuses than it earned in 2008.

Shareholder Ken Brown's lawsuit is one of two suits filed against the company over its controversial decision to hand out billions of dollars in bonuses even after it was accused of playing a central role in the financial collapse of 2008 and receiving $10 billion in direct aid from the US government.

In his lawsuit (PDF), Brown asserted that Goldman Sachs gave out $4.82 billion in bonuses in 2008, despite earnings of only $2.32 billion that year. The lawsuit alleges that the company spent 259 percent of its income in the first quarter of 2009 on compensation.

Goldman Sachs handed out $16.7 billion in compensation in the first nine months of 2009, according to Bloomberg News, and that figure may reach $22 billion for the entire year. Brown's suit says the company typically sets aside 44 percent of its net revenue for employees.

“Payment of this exorbitant amount of compensation, which has little to do with Goldman Sachs’s performance, and was financed in large part with government bailout and taxpayer money, is a waste of the company’s assets and a breach of duty and loyalty," Brown asserts in the suit.

Goldman CEO Lloyd Blankfein earned $9 million in a non-cash bonus for 2009. In prior years, he'd earned more than $20 million.
http://rawstory.com/rs/2010/0416/charges-goldman-sachs-fraud/

Views: 76

Comment

You need to be a member of 12160 Social Network to add comments!

Join 12160 Social Network

Comment by Localtarian on April 16, 2010 at 4:22pm
All swell and nice attempt on the SEC's part, but they really don't care. The SEC and the CFTC are just merely cheerleaders for the Financial Terrorist. What the SEC has done here is basically the same thing all these 'show trials' we have when the Banksters sit in front of congress and apologize and nothing else happens, no fines, no jails, no shackles for the criminals, just a mere slap on the wrist and its back to committing mass amounts of fraud, larceny, left, and economic arson for these scum bags. But, we should all remember, they're just "doing god's work" after all.

"Destroying the New World Order"

TOP CONTENT THIS WEEK

THANK YOU FOR SUPPORTING THE SITE!

mobile page

12160.info/m

12160 Administrators

 

Latest Activity

Burbia posted a video

"EVERYONE'S BEEN SHOT UP HERE": Arsonists Set Wildfire In Idaho, Open Fire On Firefighters, Police

- Shocking news just broke that multiple firefighters and officers were shot in an ambush at the Canfield Mountain Natural Area in Coeur d'Alene, Idaho.Acco...
2 hours ago
Doc Vega posted a blog post

Well Known Wilderness Photographer Disappears in the Cascades-Guess Why?

 In August of 2023 another aficionado of the great outdoors went missing. The chilling revelations…See More
9 hours ago
Doc Vega posted a blog post

The Draconian Show

Sometimes I talk to my invisible friend, IkeHe comes from another dimension when magnetic fields…See More
Friday
tjdavis posted a blog post
Thursday
Doc Vega posted a blog post
Wednesday
Doc Vega posted blog posts
Tuesday
Doc Vega posted blog posts
Jun 23
Doc Vega favorited tjdavis's photo
Jun 22
Doc Vega commented on tjdavis's photo
Thumbnail

Game Night

"Ha! Good one!"
Jun 22
Doc Vega commented on FREEDOMROX's blog post MRNA VACCINES: Question
"Listen man I know where you're at but back in October of 2023 thru December of 2023 for months…"
Jun 22
tjdavis posted a video

Architecton | Official Trailer HD | A24

SUBSCRIBE: http://bit.ly/A24subscribeWritten and directed by Victor Kossakovsky and starring Michele De Lucchi. ARCHITECTON – Coming Soon RELEASE DATE: Comin...
Jun 22
tjdavis posted photos
Jun 22
tjdavis posted a blog post
Jun 21
Burbia posted a video

Europe Will Not Survive

The hubris.All things Archaix at www.archaix.com
Jun 21
FREEDOMROX posted a video
Jun 21
Burbia commented on tjdavis's blog post Track AIPAC
Jun 20
rlionhearted_3 commented on Doc Vega's blog post Latest Details on Missile Exchanges Between Iran and Israel
"May get really ugly over there?"
Jun 20
Doc Vega posted a blog post

Latest Details on Missile Exchanges Between Iran and Israel

Latest information about the air attacks between Israel and Iran as the US moves another carrier…See More
Jun 19
tjdavis favorited Less Prone's video
Jun 19
tjdavis posted a blog post
Jun 19

© 2025   Created by truth.   Powered by

Badges  |  Report an Issue  |  Terms of Service

content and site copyright 12160.info 2007-2019 - all rights reserved. unless otherwise noted