tagged w/ Goldman Sach's
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Lloyd Blankfein, chairman and CEO of The Goldman Sachs Group, is sworn in while testifying before the Senate Homeland Security and Governmental Affairs Investigations Subcommittee on Capitol Hill on April 27, 2010 in Washington, DC.Lloyd Blankfein, chairman and CEO of The Goldman Sachs Group, is sworn in while... more
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The Securities and Exchange Commission filed securities fraud charges against Goldman, Sachs & Co. ("GS&Co") and a GS&Co employee, Fabrice Tourre ("Tourre"), for making material misstatements and omissions in connection with a synthetic collateralized debt obligation ("CDO") GS&Co structured and marketed to investors.
This synthetic CDO, ABACUS 2007-AC1, was tied to the performance of subprime residential mortgage-backed securities ("RMBS") and was structured and marketed in early 2007 when the United States housing market and the securities referencing it were beginning to show signs of distress. Synthetic CDOs like ABACUS 2007-AC1 contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States housing market.
According to the Commission's complaint, the 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 expertise in 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 interest or its role in the portfolio selection process in the term sheet, flip book, offering memorandum or other marketing materials.
The Commission alleges that Tourre was principally responsible for ABACUS 2007-AC1. According to the Commission's complaint, Tourre devised the transaction, prepared the marketing materials and communicated directly with investors. Tourre is alleged to have known of Paulson's undisclosed short interest and its role in the collateral selection process. He is also alleged to have misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-AC1 (a long position) and, accordingly, that Paulson's interests in the collateral section process were aligned with ACA's when in reality Paulson's interests were sharply conflicting. The deal closed on April 26, 2007. Paulson paid GS&Co approximately $15 million for structuring and marketing ABACUS 2007-AC1. By October 24, 2007, 83% of the RMBS in the ABACUS 2007-AC1 portfolio had been downgraded and 17% was on negative watch. By January 29, 2008, 99% of the portfolio had allegedly been downgraded. Investors in the liabilities of ABACUS 2007-AC1 are alleged to have lost over $1 billion. Paulson's opposite CDS positions yielded a profit of approximately $1 billion.
The Commission's complaint, which was filed in the United States District Court for the Southern District of New York, charges GS&Co and Tourre with violations of Section 17(a) of the Securities Act of 1933, 15 U.S.C. §77q(a), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. §78j(b) and Exchange Act Rule 10b-5, 17 C.F.R. §240.10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest and civil penalties from both defendants.
The Commission's investigation is continuing into the practices of investment banks and others that purchased and securitized pools of subprime mortgages and the resecuritized CDO market with a focus on products structured and marketed in late 2006 and early 2007 as the U.S. housing market was beginning to show signs of distress.
Sonn & Erez PLC is a nationally known law firm that concentrates its practice in securities litigation and arbitration, representing investment fraud victims all over the United States. For more information please contact Jeffrey Sonn, Esq. or Jeffrey Erez, Esq.
CONTACT:
Sonn & Erez PLC
Jeffrey Sonn, Esq. Jeffrey Erez, Esq.
1-866-372-8311
954-763-4700
www.sonnerez.com
500 East Broward Blvd. Suite 1600
Fort Lauderdale, FL 33394
http://www.investmentfraudtimes.com/other/golman_sachs_fraud.html
http://www.investmentfraudtimes.com/thumbnail.php?file=/Goldman_Sachs_776750283.jpg&size=article_mediumThe Securities and Exchange Commission filed securities fraud charges against Goldman,... more
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As an American journalist in Japan, Jake Adelstein uncovered a world unknown to many of the Japanese public, let alone to foreigners: the world of organized crime. For 12 years, he investigated for Japan's largest newspaper, the Yomiuri Shinbun.
In his final story, Adelstein went toe-to-toe with one of the country's most notorious crime bosses, a discovery that led to death threats for him and his family — death threats that have yet to be lifted. His new memoir about his experiences is called Tokyo Vice: An American Reporter on the Police Beat in Japan.
After leaving the paper in 2005, Adelstein was chief investigator for a U.S. State Department-sponsored study of human trafficking in Japan. Today he is considered one of the foremost experts on organized crime in Japan, and works as a writer and consultant in Japan and the United States.
Adelstein is also the public relations director for the Washington, D.C.-based Polaris Project Japan, which combats human trafficking and the exploitation of women and children in the sex trade. He joins Terry Gross to talk about that work, his book and the organized-crime landscape in Japan.
http://www.npr.org/templates/story/story.php?storyId=120237244As an American journalist in Japan, Jake Adelstein uncovered a world unknown to many... more
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Some investors believe Goldman Sachs Group Inc (GS.N) may try to shed its commercial banking charter to sidestep U.S. government efforts to rein in exorbitant Wall Street pay.
But regulators may force the firm to stay in the banking system.
The U.S. Federal Reserve is proposing new rules to limit pay packages in an effort to curb excessive risk-taking. Banks are expected to bridle under the new restrictions, with Goldman taking particular umbrage because of its history of outsized compensation deals for strong performers.
(See rest of article at link above)Some investors believe Goldman Sachs Group Inc (GS.N) may try to shed its commercial... more
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Wall Street banks have taken billions of taxpayer dollars. Now some of them are starting to wonder if they should give the money back.
Even before the government announced its latest efforts to fix the troubled banking industry on Tuesday, executives at Goldman Sachs and Morgan Stanley said they wanted to repay the money quickly. Both banks received $10 billion under the first rescue plan last fall.
Paying back all those funds would be difficult in this tough economic environment. But banking executives worry that the government may intrude further into their businesses as long as they are beholden to Washington.Wall Street banks have taken billions of taxpayer dollars. Now some of them are... more
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Nov. 17 (Bloomberg) -- Goldman Sachs Group Inc., the firm that set a record for Wall Street pay last year, became the first U.S. bank to scrap 2008 bonuses for senior officers in the face of the worst financial crisis since the Great Depression.
Chief Executive Officer Lloyd Blankfein, 54, and six deputies told the New York-based bank's compensation committee yesterday that they would forgo the year-end awards, according to Goldman spokesman Lucas van Praag. Each of the executives receives a salary of $600,000; Blankfein's bonus last year was almost $70 million.
``They believe it's the right thing to do,'' van Praag said in a telephone interview. ``We can't ignore the fact that we are part of an industry that's directly associated with the ongoing economic distress.''
Wall Street bonuses, typically about two-thirds of the firms' total annual compensation, are under scrutiny by lawmakers and taxpayers after the U.S. government passed a $700 billion rescue plan for the industry. Banks and brokerages have announced $707 billion of writedowns and credit losses since the subprime- mortgage market collapsed last year, and have cut almost 160,000 jobs. Lehman Brothers Holdings Inc., once the biggest underwriter of mortgage securities, was forced to file for bankruptcy.Nov. 17 (Bloomberg) -- Goldman Sachs Group Inc., the firm that set a record for Wall... more
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