SEC Case Against Goldman Not Cut-And-Dried

Apr 20 2010 | 1:21pm ET

The Securities and Exchange Commission’s fraud case against Goldman Sachs could be one of a kind, and could prove awfully hard to win.

While some have called the SEC’s accusations against the Wall Street giant the tip of the iceberg, it could prove to be the whole iceberg, Reuters reports. The case alleges that Paulson & Co.’s role in the collateralized debt obligation at the heart of the SEC charges makes that CDO unusual, while Goldman claims it was business as usual.

Certainly, there was disagreement at the highest levels of the SEC as to whether Goldman did anything wrong. The regulator’s two Republican commissioners voted against pursuing the case after a long debate on Wednesday. But the three Democrats on the Commission, including Chairman Mary Schapiro, voted to move the matter forward.

Goldman has said the charges are “completely unfounded.” And, indeed, the whole case may depend on how one defines the word “selected.”

The SEC says Paulson, which is not accused of any wrongdoing, played a major role in picking the residential mortgage-backed securities that went into the CDO, which it then shorted, to great effect. Goldman says the portfolio was vetted and chosen by ACA Management, the CDO’s largest investor.

The SEC says ACA rejected 68 of the 123 RMBS that Paulson wanted included. Goldman says that proves ACA’s independence in the matter, and that Paulson’s role wasn’t material.

To further that case, Goldman has hired Gregory Craig, the former White House counsel to President Barack Obama, to represent it. Craig now works at the giant law firm Skadden Arps Slate Meagher & Flom.


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

In search of the ‘new normal’ at the Fed

The Federal Reserve keeps baby-stepping toward a “normalization” of monetary policy. But just what is normal?

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.