Open

Coming up

Don't miss

Replay


LATEST SHOWS

WEB NEWS

France's top consumer group sues Internet giants

Read more

WEB NEWS

Web users pay tribute to South Korea ferry victims

Read more

AFRICA NEWS

A landslide victory for the 'invisible candidate' in Algeria's Presidential polls

Read more

THE WORLD THIS WEEK

The World This Week - 18 April 2014

Read more

THE WORLD THIS WEEK

The World This Week - 18 April 2014 (part 2)

Read more

MEDIAWATCH

Presidential adviser resigns over "shoe-shine scandal"

Read more

#THE 51%

Breaking stereotypes

Read more

#TECH 24

Galaxy S5 v. HTC One (M8): Which is the right one for you?

Read more

FRANCE IN FOCUS

New PM Manuel Valls outlines priorities

Read more

  • Why Syria’s cash-strapped jihadists let hostages go

    Read more

  • Video: Ukraine separatist crisis overshadows Easter celebrations

    Read more

  • The Great War's unsung four-legged heroes

    Read more

  • Divers begin pulling bodies from sunken South Korean ferry

    Read more

  • Ukraine rebels call for Russian troops after deadly clash

    Read more

  • UK’s Hamilton cruises to victory at Chinese Grand Prix

    Read more

  • Freed French journalists arrive home after Syria ordeal

    Read more

  • Syria’s Assad visits recaptured Christian town at Easter

    Read more

  • In pictures: French kite festival takes flight

    Read more

  • Le Pen’s National Front fail to woo Britain’s Eurosceptics

    Read more

  • PSG clinch fourth League Cup title after beating Lyon

    Read more

  • Militants kill Algerian soldiers in deadly ambush

    Read more

  • Scores killed in South Sudan cattle raid

    Read more

  • VIDEO: Anti-Semitic leaflets in Eastern Ukraine condemned

    Read more

  • Bouteflika, the ghost president

    Read more

  • Does Valls’ upcoming Vatican trip violate French secularism?

    Read more

  • Ukraine separatists say ‘not bound’ by Geneva deal

    Read more

  • Abel Ferrara’s hotly awaited DSK film to premiere on web

    Read more

  • Obama signs bill to block controversial Iran diplomat from UN post

    Read more

  • Astronomers discover Earth-like planet that could support life

    Read more

  • In pictures: Iranian woman pardons son’s killer at the gallows

    Read more

Business

US watchdog charges Goldman Sachs with fraud

©

Video by Christopher MOORE

Text by News Wires

Latest update : 2010-04-17

The US financial watchdog, the Securities and Exchange Commission (SEC), has filed a lawsuit against US investment bank Goldman Sachs over the marketing of a debt product tied to subprime mortgages.

REUTERS - Goldman Sachs Group Inc was charged with fraud on Friday by U.S. securities regulators in the structuring and marketing of a debt product tied to subprime mortgages.

The Securities and Exchange Commission lawsuit alleges that Paulson & Co, a major hedge fund run by the billionaire John Paulson, worked with Goldman in creating the collateralized debt obligation, and stood to benefit as its value fell, costing investors more than $1 billion.

Fabrice Tourre, a Goldman vice president who the SEC said was principally responsible for creating the product, was also charged with fraud.

Paulson has not been charged. “Goldman made the representations here to the investors, Paulson did not,” SEC enforcement chief Robert Khuzami said on a conference call.

Spokesmen for Goldman and Paulson had no immediate comment. Tourre could not immediately be reached.

The lawsuit, filed in Manhattan federal court, marks a dramatic expansion of regulatory efforts to hold people and companies responsible for activity that contributed to the nation’s financial crises. It also comes as lawmakers in Washington debate sweeping reform of financial industry regulation.

“This is big,” said Walter Todd, a portfolio manager at Greenwood Capital Associates LLC. “Reputationally, obviously, it is damaging. I’m still kind of in shock.”

In morning trading, Goldman shares sank $22.30, or 12.1 percent, to $161.97 on the New York Stock Exchange. Other bank stock also fell.

Goldman hid information, SEC says

In its lawsuit, the SEC alleged that Goldman structured and marketed a synthetic collateralized debt obligation, ABACUS, that hinged on the performance of subprime residential mortgage-backed securities.

It alleged that Goldman did not tell investors “vital information” about ABACUS, including that Paulson & Co was involved in choosing which securities would be part of the portfolio. It also alleged that Paulson took a short position against the CDO in a bet that its value would fall.

According to the SEC, the marketing materials for the CDO showed that a third party, ACA Management LLC, chose the securities underlying the CDO.

Paulson & Co paid Goldman $15 million to structure and market the CDO, which closed on April 26, 2007, the SEC said. Little more than nine months later, 99 percent of the portfolio had been downgraded, the agency said.

“In sum,” the complaint said, “Goldman Sachs arranged a transaction at Paulson’s request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests, but failed to disclose to investors ... Paulson’s role in the portfolio selection process or its adverse economic interests.”

Date created : 2010-04-16

  • FINANCE

    Fed probes Goldman Sachs's dealings with Greece

    Read more

Comments

COMMENT(S)