Sunday, 25 January 2015
Last updated 2 days ago
Oct 18 2010 | 9:43am ET
The Securities and Exchange Commission's fraud lawsuit against Goldman Sachs was not motivated by a desire to boost President Barack Obama's then-faltering drive to push through financial regulation reform, the agency's inspector general has found.
The only politics in the announcement and timing of the suit came from a desire not to anger New York Attorney General Andrew Cuomo, who announced a settlement of charges against private equity firm Quadrangle Group the day after the SEC voted to sue Goldman for misleading investors in a collateralized debt obligation allegedly structured and marketed on behalf of hedge fund Paulson & Co.
"I was a little worried that the attorney general would be very upset if we announced multiple cases the same day," SEC Chairman Mary Schapiro testified in H. David Kotz's investigation.
The regulator's investigation of Goldman was frequently delayed, and the SEC said it was concerned about leaks, Congressional hearings and "maximizing and shaping positive press coverage."
On the latter point, things appear to have gone far better than the agency could ever have hoped.
"Many SEC witnesses in this investigation, including Chairman Schapiro, testified that they were surprised or shocked at the extent of the media attention given to the Goldman action," Kotz wrote. "This belief held by the SEC staff, which is corroborated by e-mails, that the Goldman action might not have significant public impact, much less the impact that it ultimately had, is another factor that argues against the idea that the SEC or its staff were attempting to influence financial regulatory reform legislation."
Kotz also found that the frequent delays in bringing the case had nothing to do with politics.
The SEC first planned a vote by its commissioners for December, but delayed it to give the investigation more time. It then scheduled a Jan. 28 vote—motivated by an impending Senate hearing on Goldman—but delayed it again over a series of issues, including concerns by one commissioner, questions about whether to accuse an "additional individual" in the case and a desire to give the probe yet more time.
The SEC finally voted—along party lines—on April 14 to bring the suit. Goldman eventually settled the case for $550 million.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…