Judge Says Goldman Must 'Suffer' Bayou Arbitration Award

Dec 3 2010 | 11:03am ET

When U.S. District Judge Jed Rakoff tossed Goldman Sachs' attempt to vacate a huge arbitration award against it stemming from the Bayou Group hedge fund fraud, he did not mince words.

Rakoff said he rejected Goldman's appeal of the $20.6 million award because, having "voluntarily" entered arbitration, "this wonderful alternative to the rule of reason," the bank "must suffer the consequences."

"Arbitration is touted as a quick and cheap alternative to litigation," Rakoff wrote, although "experience suggests that it can be slow and expensive. But it does have these 'advantages'; unlike courts, arbitrators do not have to give reasons for their decisions, and their decisions are essentially unappealable."

Rakoff ruled last month that Goldman had failed to show that the Financial Industry Regulation Authority arbitration decision "manifestly disregarded the law."

That decision was the largest arbitration award ever levied against a securities firm. The unsecured creditors of Bayou, which collapsed four years ago, costing investors more than $400 million, alleged that Goldman showed "either gross negligence or a willful choice to ignore signs of fraud" in clearing Bayou's trades.


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

Versum Materials (VSM), with a market capitalization of $2.7 billion, enables chipmakers to achieve higher performance at lower cost with enhanced reliability. Versum is a leading global provider of electronic materials for the integrated circuit and flat-panel display markets.