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| Goldman Sachs is accused of fraud | Goldman Sachs is accused of fraud |
| (9 minutes later) | |
| Goldman Sachs, the Wall Street powerhouse, has been accused of defrauding investors by America's financial regulator. | Goldman Sachs, the Wall Street powerhouse, has been accused of defrauding investors by America's financial regulator. |
| The Securities and Exchange Commission (SEC) alleges that Goldman failed to disclose conflicts of interest. | The Securities and Exchange Commission (SEC) alleges that Goldman failed to disclose conflicts of interest. |
| The claims concern Goldman's marketing of sub-prime mortgage investments just as the US housing market faltered. | The claims concern Goldman's marketing of sub-prime mortgage investments just as the US housing market faltered. |
| Goldman rejected the SEC's allegations, saying that it would "vigorously" defend its reputation. | Goldman rejected the SEC's allegations, saying that it would "vigorously" defend its reputation. |
| News that the SEC was pressing civil fraud charges against Goldman and one of its London-based vice presidents, Fabrice Tourre, sent shares in the investment bank tumbling 12%. | News that the SEC was pressing civil fraud charges against Goldman and one of its London-based vice presidents, Fabrice Tourre, sent shares in the investment bank tumbling 12%. |
| The narrative of what transpired, as set out by the SEC, is quite the financial thriller. Robert Peston, BBC Business Editor href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/04/goldman_may_owe_british_taxpay.html">Peston's Picks: Why Goldman may owe UK taxpayers $841m | |
| The SEC says Goldman failed to disclose "vital information" that one of its clients, Paulson & Co, helped choose which securities were packaged into the mortgage portfolio. | The SEC says Goldman failed to disclose "vital information" that one of its clients, Paulson & Co, helped choose which securities were packaged into the mortgage portfolio. |
| These securities were sold to investors in 2007. | These securities were sold to investors in 2007. |
| But Goldman did not disclose that Paulson, one of the world's largest hedge funds, had bet that the value of the securities would fall. | But Goldman did not disclose that Paulson, one of the world's largest hedge funds, had bet that the value of the securities would fall. |
| The SEC said: "Unbeknownst to investors, Paulson... which was posed to benefit if the [securities] defaulted, played a significant role in selecting which [securities] should make up the portfolio." | The SEC said: "Unbeknownst to investors, Paulson... which was posed to benefit if the [securities] defaulted, played a significant role in selecting which [securities] should make up the portfolio." |
| "In sum, Goldman Sachs arranged a transaction at Paulson's request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests," said the Commission. | "In sum, Goldman Sachs arranged a transaction at Paulson's request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests," said the Commission. |
| Housing collapse | Housing collapse |
| The whole building is about to collapse anytime now... Only potential survivor, the fabulous Fabrice... Email by Fabrice Tourre | The whole building is about to collapse anytime now... Only potential survivor, the fabulous Fabrice... Email by Fabrice Tourre |
| The SEC alleges that investors in the mortgage securities, packaged into a vehicle called Abacus, lost more than $1bn (£650m) in the US housing collapse. | The SEC alleges that investors in the mortgage securities, packaged into a vehicle called Abacus, lost more than $1bn (£650m) in the US housing collapse. |
| Mr Tourre was principally behind the creation of Abacus, which agreed its deal with Paulson in April 2007, the SEC said. | Mr Tourre was principally behind the creation of Abacus, which agreed its deal with Paulson in April 2007, the SEC said. |
| The Commission alleges that Mr Tourre knew the market in mortgage-backed securities was about to be hit well before this date. | The Commission alleges that Mr Tourre knew the market in mortgage-backed securities was about to be hit well before this date. |
| The SEC's court document quotes an email from Mr Tourre to a friend in January 2007. "More and more leverage in the system. Only potential survivor, the fabulous Fab[rice Tourre]... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!" | The SEC's court document quotes an email from Mr Tourre to a friend in January 2007. "More and more leverage in the system. Only potential survivor, the fabulous Fab[rice Tourre]... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!" |
| Goldman denied any wrongdoing, saying in a brief statement: "The SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation." | Goldman denied any wrongdoing, saying in a brief statement: "The SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation." |
| Calls to Mr Tourre's office were referred to the Goldman press office. Paulson has not been charged. | Calls to Mr Tourre's office were referred to the Goldman press office. Paulson has not been charged. |
| 'Regulation risk' | 'Regulation risk' |
| Goldman, arguably the world's most prestigious investment bank, had escaped relatively unscathed from the global financial meltdown. | Goldman, arguably the world's most prestigious investment bank, had escaped relatively unscathed from the global financial meltdown. |
| This is the first time regulators have acted against a Wall Street deal that allegedly helped investors take advantage of the US housing market collapse. | This is the first time regulators have acted against a Wall Street deal that allegedly helped investors take advantage of the US housing market collapse. |
| Analyst Matt McCormick of Bahl & Gaynor said that the allegation could "be a fulcrum to push for even tighter regulation". | Analyst Matt McCormick of Bahl & Gaynor said that the allegation could "be a fulcrum to push for even tighter regulation". |
| "Goldman has a fight in front of it," he said. | "Goldman has a fight in front of it," he said. |