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Fraud*
According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Friday, April 15, 2011

Goldman Sachs Perjured Itself

Yves Smith at naked capitalism has interesting comments to make about the Levin and Coburn report called Wall Street and the Financial Crisis.

Certain widespread actions that the players deny and other key elements we are familiar with for having stimulated the financial crisis are there in the report. However, Yves is interested in "supportive evidence" that is not stressed in the report. She will surely be looking for that evidence.

However, she makes the observation that Goldman Sachs will almost certainly not be prosecuted for perjury. It is unfortunate that she has to end her column on such a pessimistic note. Below is an excerpt:

Senator Levin Claims Goldman Execs Perjured Themselves Before Congress on Mortgage Testimony
by Yves Smith - naked capitalism

As readers may know, the Senate Permanent Subcommittee on Investigations just issued another report, Wall Street and the Financial Crisis. This is a far more focused and damning document than the Financial Crisis Inquiry Commission report, which was produced at considerably more expense and was undermined by dissent among its commissioners (which in fairness appears to have been by design).

I confess to having only gotten partway through the document and plan to issue a more thorough discussion in the next few days. However, some things are clear at this juncture. The committee took the approach of drilling into certain practices and players they regarded as key to see where that took them. On the one hand, that serves to provide far more concrete proof of the extent and nature of certain practices believed to be widespread that industry players have either denied or argued were based only on anecdotal evidence and were therefore simply isolated examples. It serves to demonstrate that the degree of institutional failure and fraud were widespread and played a direct and significant role in the crisis. On the other hand, it is not and cannot be a comprehensive account, and therefore misses other key elements which this writer along with other industry participants believe were serious and insufficiently examined drivers of the crisis (in particular collusive relationships among major players that were presented as independent). Thus it does not in the end do more to explain the crisis (all its research focused on issue, such as rating agency bad behavior and regulatory incompetence) that are widely accepted by the public and virtually all analysts of the crisis not operating on behalf of the financial services industry, but provides more support and color around some of the major issues. However, I suspect that some of its supporting evidence, which the subcommission also released, will point to issues that the report did not stress.

. . . .

Senator Carl Levin, in releasing the report, took aim at Goldman’s truthiness in its testimony before Congress and called on Federal prosecutors to examine whether Goldman committed perjury. Two issues are at stake. First it the Goldman claim that it lost money on its housing bets and was not net short housing (or at least not for long). Second is the notion that the firm was acting merely as a market marker, which basically means caveat emptor, if clients made bad bets, Goldman was merely acting as a neutral middleman.

While Goldman made the usual pious denials, the evidence in the report supports the Levin charges. It notes:

Overall in 2007, its net short position produced record profits totaling $3.7 billion for Goldman’s Structured Products Group, which when combined with other mortgage losses, produced record net revenues of $1.2 billion for the Mortgage Department as a whole.

Read the full article here

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