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SEC Slaps Goldman Sachs With Fraud Suit

Posted on Apr 16, 2010
Goldman Sachs
AP / Mark Lennihan

Headed for a fall?: Goldman Sachs’ headquarters in New York City.

In a move that may signal the beginning of the end of Goldman Sachs’ golden era, the Securities and Exchange Commission filed a civil suit Friday against the banking behemoth, accusing the company of selling customers subprime mortgage derivatives that Goldman’s own financial masterminds bet against—for profit, of course.  —KA

The New York Times:

The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers.

The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment.

In a statement, Goldman called the S.E.C. accusations “completely unfounded in law and fact” and said the firm would “vigorously contest them and defend the firm and its reputation.”

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market. Those deals, which were the subject of an article in The New York Times in December, initially protected Goldman from losses when the mortgage market disintegrated and later yielded profits for the bank.

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.

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MarthaA's avatar

By MarthaA, April 19, 2010 at 9:50 am Link to this comment

Not only Goldman Sach’s but all members of the derivative scam operation need to suffer severe consequences.  The populace of the United States simply must not accept corporate government by Goldman Sach’s, or any other corporation.  All corporations involved must be made if at all possible to suffer severe consequences.

These DINO, Democrat in Name Only, conservative/moderate Democrats are actually Conservative Republicans in Democrat clothing who infiltrated the Left and are led by the Republicans who finance the Democratic Leadership Council, which must be removed altogether from the Left side of political dialog.

This was a Republican Plan that used the Democrats.  The populace must get as many of the DINO’s out of the Democratic Party as is possible and replace them with progressive liberals that will represent the populace, instead of corporations and the wealthy at the expense of the populace.

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MarthaA's avatar

By MarthaA, April 19, 2010 at 9:23 am Link to this comment

samosamo, April 19 at 1:27 pm,

Once illegal in the United States, Right-Wing Hitleresque destructive propaganda led by Rupert Murdoch is destroying the United States, and the man should be banned as well as his Hitleresque type of destructive political propaganda.  I agree that Rupert Murdoch’s Hitleresque propaganda has hurt the nation much worse than the OK City bombing and the 9/11 Episode combined, because without all the propagandizing by Fox News and other Rupert Murdoch owned media outlets, there would never have been an illusive war on terror.

Just as in the 9/11/01 Controlled Episode, I have my doubts as to who the actual guilty party(s) was/were in the OK City bombing, I know what the government has said about Timothy McVeigh, and that might be true, but it was all propagandized and conveniently swept under the rug, swiftly and neatly where the populace was told what happened and had no chance whatsoever to discern for themselves what really happened, similar to the 9/11/01 Controlled Episode.

As for the SEC case against Goldman Sach’s, I expect the conservatives of the Roberts’ Supreme Court will turn over any rulings against Goldman Sach’s, and the conservative Right-Wing EXTREMISTS will continue their derivative bubbleathon against the populace of the nation.  George Soros is warning about the set up of another bubble crash to arrive in about eight years,  which would definitely finish our nation off, as far as the populace is concerned, where the United States becomes like Mexico, a country of haves and have nots.  The only good thing that I can see is that many, many people will learn what genteel is, and maybe will realize they are the populace, and start working with the populace, instead of working against the populace helping the wealthy take everything away from the populace, which is what Rupert Murdoch’s propagandized genteel Tea Party is doing.

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By samosamo, April 19, 2010 at 8:27 am Link to this comment

By MarthaA, April 19 at 12:48 pm

Could not agree more except that I consider rupert murdock the
most insidious ACTUAL terrorist to the people of planet earth
and so blatantly so that he really should be picked up asap and
prosecuted for his crimes which far far exceeds anything that a
Timothy McVeigh ever did and far more deserving of the same

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MarthaA's avatar

By MarthaA, April 19, 2010 at 7:48 am Link to this comment

Fox News and Fox News’ Glenn Beck, Rush Limbaugh, Bill O’Reilly and Sarah Palin, etc. are Rupert Murdock of News Corp., who is trying to pull off in the United States what Hitler did in Germany, which is the use of propaganda to destroy in the eyes of the populace any thought of the populace being liberal, or socialist and needing community, union organization, and socialism for the populace,  recognizing that the populace is the majority population, the common population, or even the populace being the populace.  Rupert Murdoch pays these thugs to propagandize CONSERVATISM; otherwise, there would be no CONSERVATIVE Fox News propaganda channel.  These CONSERVATIVE genteel toadies are working and doing a job for their pay from Australian, Rupert Murdoch, the Hitler behind the scenes of all the atrocious propaganda on television and radio against liberals, community, unions, socialists and socialism for the populace, majority populace, common population and the populace being recognized as the populace.  It is time to send Murdoch back to Australia.

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RAE's avatar

By RAE, April 18, 2010 at 2:05 pm Link to this comment

Paul Currier penned, in part “What is necessary now is we all call for new Special Prosecutors with subpoena power and full scope.”

This should be a slam-dunk. After all, the Special Prosecutors of Sexual Zeal nearly toppled an entire Presidency all because of extra-curricular activities that would have had NO impact on the country’s operation if they hadn’t become involved. Imagine what the Special Prosecutors could do with something really important! The tumble long ago in Jericho would pale beside the landslide that would hit Wall Street.

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By Paul Currier, April 18, 2010 at 10:11 am Link to this comment

@diman -  I listened to the black box recordings posted on Youtube of what
was purported to be the final record of the flight where 120 of the Polish
Government died.  I did not hear the words Tom Heneghan reported either.  So
your concern appears valid.  As Putkin (the past Director of the KGB and still “in
total control” equivalent to G.H.W. Bush’s still total control over the CIA) was
personally leading the Russian Investigation of the crash - and was on site - I
do not believe the recording of the black box posted was in fact not doctored. 
That whole discussion is off topic here.  This topic is Goldman Sachs, and the
allegation that the new SEC civil charges are part of a coverup of the criminal
components of this many year American Crime Scene.

@RAE - I agree with our need for factual record.  This need brings up two
critical points.  First is that the use of the Civil Charges appears to be a coverup
tool to prevent what I believe are needed Criminal Charges.  The civil case alone
really does lock-up all evidence inside a Federal Prosecution.  “Discovery” now
belongs to and will go to the GS&Co; Lawyers, and be blocked from the prying
eyes of any good investigative journalist.  This fact is why the civil case appears
to be a coverup, as now all evidence will be shared only with the SEC/DOJ and
the Lawyers for the Perps.  Secondly, the case includes the problem of access
to direct and related evidence for the many States’ Attorneys General, who were
preparing criminal/civil cases against GS&Co; and others.  The Obama
Administration has the appearance of being 100% controlled by GS&Co;, as far
is all matters related to Wall Street, the FED, the US Treasury,  and all the
players in these 2004 -2009 multi trillion dollar events.  GS&Co; clearly is up to
their eyeballs in collusion with their “Counter-Parties Teams”.  All the players
involved sure look guilty of what clearly is violation of R.I.C.O. on it’s face.  The
Connecticut AG was about to bring charges.  Other State AG’s are also currently
involved in preparing charges.  How many State Employee Pension Funds were
robbed?  This huge crime scene suffers from the fact that the SEC, which is
apparently still controlled by Bush People, has not done much of anything other
than coverup, for decades.  The key to this matrix is AIG.  The People of the
United States now own AIG. AIG sold the CDO instruments that were used to
gut the US Treasury, and yes, GS&Co; were in on that with bloody hands.  The
Facts Elliott Spitzer and others have called to see are the 10 years of email
records of the company we now own (AIG), with GS&Co; and the rest.  This
email trail will open up access to the forbidden fruit.  It appears clear to me
that the forbidden fruit of knowledge of who, what, when, where, how, will
include factual evidence interlocking all of the members of the Wall Street
Cabal.  I would expect that the bank account numbers, the bank account
owners names, the amounts insured with the AIG CDO instruments, and more
is recorded in that ten years of email records.  These are numbers crimes. 
Numbers people like records for tax evasion, avoidance, settlement, bundling
for sale (asset backed derivatives), CDO components, as well as assignment.  I
would expect the records of assignment to include Sovereign Fund counter-
parties that will include the Nations of Israel, Dubai, Greece, China and others.

What is necessary now is we all call for new Special Prosecutors with subpoena
power and full scope.  Remove this case from the Federal Government, due to
the vast conflicts of interests between all the GS&Co; Alumni running our
Federal Government, and GS&Co; as a now defendant.  I suggest a good team of
lawyers with complex case experience.  Ralph Nader, Elliott Spitzer, Vincent
Bugliosi all come to mind.  We should require real “Political Independence” due
to how many in Congress are apparently owned by GS&Co;.

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By Jon, April 18, 2010 at 8:30 am Link to this comment
(Unregistered commenter)

If you or I ‘forget’ to pay our IRS taxes, and ignore their warning letters, we get our wages, or our bank accounts seized.  If you or I steal a bottle of soda from the corner store, we get jail time and probation.  But the bankers can totally trash the U.S. economy, and they get bonuses and a slap on the wrist and a wink.  Let’s toss them into jail for 5 to 10, with their being disallowed to be ‘bankers’ after they get out.  Let’s seize their assets, let’s kill their retirement plan, let’s claw back bonuses.  In other words, let’s treat bankers like the criminals that they are.  And why don’t we ‘make mistakes’ in sentencing and penalty too—-just as our justice system does with the guy who steals that soda, or writes a check that bounces.  Justice for all.  The SAME justice.  No more banker-justice.

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By ocjim, April 18, 2010 at 8:28 am Link to this comment

A good first step, but ultimately we need to break up these “too-big-to-fail” financial institutions, institutions that increasingly add nothing to the desired dynamics of our economy.

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By diman, April 18, 2010 at 6:13 am Link to this comment

To Paul Currier

Be careful about this source of information i.e. Tom Heneghan, though I have no problem with this so-called “intelligence report”, his claim to have information about polish president’s pilot yelling “Ali Akbar” (Heneghan’s own words) seconds before it crashed is pure BULLSHIT.

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RAE's avatar

By RAE, April 18, 2010 at 5:56 am Link to this comment

Talking in generalities, eg “Wall Street,” gets us nowhere. We need specific names, dates and proof of crimes committed before effective action can be taken even if someone or some agency had the authority and/or courage to do it.

These guys may be creeps and criminals but they aren’t usually stupid enough to leave viable evidence that would incriminate themselves.

These cretins are like cancer that has metastasized. It’s got a firm hold on the entire system. The only cure is death.

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By Paul Currier, April 17, 2010 at 11:40 pm Link to this comment

Tom Heneghan covers the whole fiasco with greater granularity of detail here:

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By Chris, April 17, 2010 at 6:54 pm Link to this comment
(Unregistered commenter)

GS could be completely wiped out in a matter of months.  How?  Clients can
decide they don’t want to work with them anymore.  Other IB can decide they
won’t trade with them anymore.  Believe it or not, trust is very important on Wall
Street, and competition for business is very strong.  If other IB smell blood, they
will go in for the kill.  It’s happened before.

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Eric L. Prentis's avatar

By Eric L. Prentis, April 17, 2010 at 6:42 pm Link to this comment

All Kabuki theater, designed to placate the gullible masses; Goldman Sachs will get a light slap on the wrist and told to be better boys in the future; Washington politicians will not damage their political version of a sugar daddy, especially since Goldman Sachs pays the politicians’ huge campaign contributions with your and my money. This is an example of US crony capitalism at its worst; we live in a banana republic not worthy of the name.

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By diamond, April 17, 2010 at 2:32 pm Link to this comment

Wall Street’s got a lot more to answer for than mere fraud, though I have to admit this Goldman Sachs fraud and Maddoff’s fraud combined were probably enough on their own to bring the global economy to its knees. There’s just been a great article in my newspaper called ‘The Man who Figured it Out’ about Harry Markopolos. He tried for a long time to warn the SEC about Madoff and what has been called ‘The biggest fraud in history’ but was fobbed off for 8 1/2 years which can only have been because (a) the SEC was protecting Madoff or (b) the SEC is incredibly stupid and naive.  According to Markopolos, Madoff was ‘stealing from some of the most powerful people in the world, many of them in organized crime’ and clearly those people were protecting Madoff because they couldn’t believe he would dare to scam them. Markopolos has written a book, “No One would Listen: A True financial thriller”, published by Wiley.  Markopolos has also given evidence at a US Senate hearing which is probably why the move is now on against derivatives. And Markopolos knows exactly where to put the blame: “Usually the perpetrators of the frauds that I’m working on are typically in the CEO level suite…This is where the fraud is part of the company’s business model.”

And lest we forget, this criminality is tied in with 9/11, which was one of the biggest smash and grab raids in history:

On October 2nd 2001 the Wall Street Journal referred to an ongoing SEC investigation into suspicious trading in stocks leading up to the 9/11 attacks. This was joined by a Secret Service investigation into the abnormally high trade in U.S. Treasury notes prior to the attacks. There was even a single $5 billion dollar purchase of the notes. U.S. Treasury notes are seen as a rock solid investment, particularly in uncertain times, when investors tend to prefer them to other riskier investments such as stocks (9-11 Research). The value of Treasury notes went up markedly after 9/11.  These investigations may have seemed to give some hope that the troubling questions raised by all of this would be answered.  Not long after 9/11 the SEC put out a list to securities firms around the world looking for information. Stocks flagged by the SEC included the following corporations:

American Airlines, United Airlines, Continental Airlines, Northwest Airlines, Southwest Airlines, US Airways, Martin, Boeing, Lockheed Martin Corporation, AIG, American Express Corporation, American International Group, General Motors, Raytheon, W.R. Grace, The Citigroup Inc., Royal & Sun Alliance, Lehman Brothers Holdings Incorporated, Vornado Reality Trust, Morgan Stanley, Dean Witter & Co., and Bear Stearns. And many, many more.

Then there was a period of silence, but on October 19th the San Francisco Chronicle had an article saying that the SEC had done something absolutely unprecedented: it had deputized hundreds of private officials for its investigation.

Michael Ruppert, formerly of the LAPD, explains in his book, ‘Crossing the Rubicon’, exactly what this means:
‘What happens when you deputize someone in a national security or criminal investigation is that you make it illegal for them to disclose publicly what they know. Smart move. In effect, they become government agents and are controlled by government regulations rather than their own conscience. In fact, they can be thrown in jail without a hearing if they talk publicly. I have seen this implied threat time and time again with federal investigations, intelligence agents, and even members of the United States Congress who are bound so tightly by secrecy oaths and agreements that they are not even able to disclose criminal activities inside the government for fear of incarceration’ (9-11 Research).

As I said they’ve done a lot more than just set up and conduct criminal scams on the public and the system is rotten to the core so I hope there won’t be the usual talk about ‘a few bad apples’.

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By IndependentVoice2010, April 17, 2010 at 9:05 am Link to this comment

You’ve got to be kidding. John Paulson (no relation to “Hank”) made billions and gets off scott free and Goldman will pay a relatively small fine (hundreds of millions). It will then be business as usual since greed is all that matters on Wall Street. The only hope is that “outrage” will make Congress pass real financial reform. Perhaps the Tea Party and it’s sponsor, Fox News, will finally take up a real issue and push Republicans to act?

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MarthaA's avatar

By MarthaA, April 17, 2010 at 8:46 am Link to this comment

Congress must abolish the sale of derivatives, actually Congress must abolish derivatives.

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ThaddeusStevens's avatar

By ThaddeusStevens, April 16, 2010 at 6:12 pm Link to this comment

This is obviously a ploy: the cozy relationship between the government and this behemoth is obvious, any 7th grader searching with Google could prove it.

Adam Storch: SEC Hires 29-Year-Old Ex-Goldman Sachs Exec For Key Role
In May 2006, Paulson left the firm [Goldman Sachs] to serve as U.S. Treasury Secretary,

Someone is trying to say, “See, we’re still in charge.”
Question is, Who really IS in charge?

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By glider, April 16, 2010 at 3:03 pm Link to this comment

While good news one would expect only a slap on the wrist relative to the crime.  A true punitive judgment would need to completely reverse the gain GS achieved from the fraud itself, and slap on additional pain.  Knowing the current state of our corrupt government and the near uselessness of the SEC I do not recommend holding your breath.

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RAE's avatar

By RAE, April 16, 2010 at 2:34 pm Link to this comment

NO! Tell me it’s not true. Goldman Sachs? Fraud? Lies? Doing something not in the best interest of their investors and customers? NO. No. No… it can’t be true.

What’s this world coming to when you can’t trust a Banker?

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By samosamo, April 16, 2010 at 2:25 pm Link to this comment

Would it be too much to hope that this den of financial terrorists
will be confiscated and shut down with indictment, prosecution
and some very well earned hard time to serve a fitting end? I’ll
believe if and when I see it.

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skulz fontaine's avatar

By skulz fontaine, April 16, 2010 at 12:06 pm Link to this comment

Yippee! Now, drag Lloyd Blankfein out into the street and keel haul his venal
corrupt ass!

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By NYCartist, April 16, 2010 at 11:41 am Link to this comment

Expect “slap on the wrist” fine?  So many former top Goldman Sachs at top of gov’t….

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