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| -Lurid Crime Tales- |
| SEC Charges Goldman With Fraud |
| 2010-04-16 |
| Hodges! Quick, buy me some more Congressmen! |
| Posted by:Procopius2k |
| #5 "Is this the tip of the iceberg?" That's an easy one - Yes. |
| Posted by: Fester Thaiger8930 2010-04-16 13:14 |
| #4 From Zero hedge, who are in meltdown. * CDO * Collateralized Debt Obligations * Credit Default Swaps * FINRA * Goldman Sachs * Housing Market * Reality * Robert Khuzami * Securities and Exchange Commission * Short Interest * Subprime Mortgages * Term Sheet GS&Co marketing materials for ABACUS 2007-AC1 – including the term sheet, flip book and offering memorandum for the CDO – all represented that the reference portfolio of RMBS underlying the CDO was selected by ACA Management LLC (“ACA”), a third-party with experience analyzing credit risk in RMBS. Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. (“Paulson”), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process. After participating in the selection of the reference portfolio, Paulson effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (“CDS”) with GS&Co to buy protection on specific layers of the ABACUS 2007-AC1 capital structure. Given its financial short interest, Paulson had an economic incentive to choose RMBS that it expected to experience credit events in the near future. GS&Co did not disclose Paulson’s adverse economic interests or its role in the portfolio selection process in the term sheet, flip book, offering memorandum or other marketing materials provided to investors...The deal closed on April 26, 2007. Paulson paid GS&Co approximately $15 million for structuring and marketing ABACUS 2007-AC1. By October 24, 2007, 83% of the RMBS in the ABACUS 2007-AC1 portfolio had been downgraded and 17% were on negative watch. By January 29, 2008, 99% of the portfolio had been downgraded. As a result, investors in the ABACUS 2007-AC1 CDO lost over $1 billion. Paulson’s opposite CDS positions yielded a profit of approximately $1 billion for Paulson.By engaging in the misconduct described herein, GS&Co and Tourre directly or indirectly engaged in transactions, acts, practices and a course of business that violated Section 17(a) of the Securities Act of 1933, 15 U.S.C. §77q(a) ("the Securities Act"), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. §78j(b) ("the Exchange Act") and Exchange Act Rule 10b-5, 17 C.F.R. §240.10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, civil penalties and other appropriate and necessary equitable relief from both defendants. |
| Posted by: tipper 2010-04-16 13:05 |
| #3 "Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc., with economic interests directly adverse to investors in the [CDO], played a significant role in the portfolio selection process," the complaint said. The complaint said Paulson had an incentive to stuff the CDO with mortgage-backed securities that were likely to get into trouble. SEC enforcement chief Robert Khuzami alleged that Goldman misled investors by telling them that the securities "were selected by an independent, objective third party." "The product was new and complex but the deception and conflicts are old and simple," said Mr. Khuzami. ... "Credit markets are seeing a sizeable impact from the Goldman news," said Bill Larkin at Cabot Money Management. "The question is, has the SEC discovered what may have been a common practice across the industry? Is this the tip of the iceberg?" Not just "discovered", one would hope, but feeling comfortable enough about the markets to trot out the CYA litigation. Where's that Roger Rabbit image? |
| Posted by: KBK 2010-04-16 13:01 |
| #2 Good, send their asses here to Phoenix were i'm upside down by 45% on my home. I have a special place for them out in the desert, sheriff Joe would love them. |
| Posted by: 49 Pan 2010-04-16 12:56 |
| #1 Way too little, way too late, but better than anything else they've done to date. Appropriate sentence for all involved execs would be confiscation of ill-gotten gains, then to be locked in pillory in public place with immunity to anyone throwing vile things at them. |
| Posted by: Glenmore 2010-04-16 12:24 |