Criminal fraud will be tough to prove on Goldman
New organizations are reporting that the Justice Department has opened a file for possible criminal prosecution against Goldman Sachs. The SEC, as has been widely reported, filed a civil fraud case against the firm. The case relates to the Abacus 2007 portfolio of toxic junk that hedge fund manager John Paulson bet against.
It's going to be hard enough for the SEC to prove civil fraud in a case that involved consenting, sophisticated institutional investors on all sides. Hard to imagine that the Justice case will go anywhere. The news leak about opening a criminal file suggests it's all PR anyway.
Comments
There is an excellent story written about a month ago that includes a graph that depicts the position of Lloyd Blankfein eerily close to a position where he now finds his firm. You make want to take a look at:
http://funks2.wordpress.com/2010/03/30/when-being-greedy-trumped-being-smart-where-were-the-geniuses/
Posted by: FunkUniversity | April 30, 2010 12:56 PM
It's as simple as whether or not the long party was told Abacus was assembled by an independent, uninterested third party, and whether or not Paulson had influence or control on the actual assembly.
Answer yes to both questions=civil fraud
If yes to a 3rd question of did GS know the answer to the first 2 questions at the time it sold Abacus=criminal fraud (criminal intent as opposed to unintentional).
Posted by: Josh Dowlut | April 30, 2010 1:00 PM