Goldman Sachs, "Trickery and treachery are the practices of fools that have no wits enough to be honest"

That quotation from Benjamin Franklin is an apt one for Goldman Sachs especially when you consider their 2010 Annual Report to the Securities and Exchange Commission. In that report, Goldman Sachs lists the legal proceedings that will probably cost them $3.4 billion in the future. It is amazing to read the approximately 23 categories of litigation that they have to contend with--including underwriting inadequacies, misstatements and omissions, violations of federal securities laws, fraudulent conveyance litigation, compensation-related litigation, mortgage suits including CDOs (Hudson Mezzanine 2006-1 and 2006-2), breaching of fiduciary duties, anti-trust suits, non-disclosure claims, employment related matters, financing and swap transactions (Greece), non-compliance with sales, trading and clearance practices (in regards to short sale rules, algorithmic and quantitative trading, etc.), municipal securities matters and financial crisis-related matters (between GS and AIG, Bear Stearns, Lehman Brothers).


But nary a hint of a criminal prosecution!

That is quite a legacy that Goldman Sachs is creating for itself.

And during all this chaos for the world's financial system, Goldman Sachs in 2010 still managed to earn 68 straight days of $100 million. See the chart in the Business Insider here.


Dominic Rushe reports in the guardian.co.uk (New York) that

Lawsuits could cost Goldman Sachs up to $3.4 bn
by Dominic Rushe (New York) - guardian.co.uk

Goldman Sachs faces a barrage of litigation that could "reasonably" cost it as much as $3.4bn (£2.1bn), according to a regulatory filing by the investment bank.

The bank has been named as a defendant in lawsuits related to its actions during the 2008 credit crisis, its research coverage and the collapse of the cable company Adelphia Communications. It is being sued by the city of Cleveland for causing a "public nuisance" with its backing of sub-prime loans.

In July last year, Goldman was fined a record $550m by the Securities and Exchange Commission (SEC), the US financial regulator, over claims that it misled investors who bought collateralised debt obligations (CDOs) linked to sub-prime mortgages. In accepting the fine, the bank did not admit or deny the damaging allegations.

Goldman said in its annual report to the SEC that plaintiffs suing over mortgage-related securities had cumulative losses of approximately $457m as of December.

The bank disclosed that it had also received requests for information from regulators "relating to the mortgage-related securitisation process, sub-prime mortgages, CDOs, synthetic mortgage-related products, particular transactions and servicing and foreclosure activities, and is co-operating with the requests". The filing states that Goldman expects other litigation.

The $3.4bn total is not the amount Goldman expects to pay but, as the filing puts it, the amount that there is a "reasonably possible" chance it will have to pay. It has not previously disclosed its potential legal bill.

Goldman said that conflicts of interest were increasing as its business and client base expanded. The bank said that "identifying and dealing with conflicts of interest is complex and difficult, and our reputation, which is one of our most important assets, could be damaged" if the bank should "fail, or appear to fail, to identify, disclose and deal appropriately with conflicts of interest".

The bank said that it has closed or is closing two trading units that made bets with the company's own capital. The closures come after the introduction of financial regulations that reduce the percentage of a bank's capital with which it can make bets.

Goldman also disclosed in the filing that there were 68 days where it had trading gains of $100m or more in 2010, down from the record 131 days in 2009. There were 25 days in 2010 when it either made no money or lost money.

Read the article here