How an Inquiry of Goldman Sachs Might Play Out
By Peter J. Henning - DealBook
Goldman Sachs has already received subpoenas from unnamed regulators investigating its mortgage securities operations. Now, federal prosecutors appear to be interested in those operations as well, and subpoenas could follow.
If so, this would signal a new and potentially more threatening inquiry into its conduct during the financial crisis.
. . . .If Goldman does receive Justice Department subpoenas, that would indicate that prosecutors have found enough information about potential criminal conduct in the subcommittee’s report — and perhaps elsewhere — to take the case to the next level by requiring the production of even more documents.
Subpoenas alone would not mean that the Justice Department is poised to file any charges against Goldman or its executives, but the specter of the agency taking such action would certainly weigh on the firm.
While an inquiry could end once the firm responded to any subpoenas, here are some thoughts on how an investigation of Goldman may develop.
Who Would Be in Charge?
The first question that would be answered from a subpoena is which office in the Justice Department would conduct a grand jury investigation. The subcommittee’s referral was sent directly to the attorney general, Eric H. Holder Jr., and he would determine who in the Justice Department would be responsible for the case.
Two likely candidates are the United States attorney for the Southern District of New York and the Justice Department’s Fraud Section, which is based in Washington.
. . . .What Would Subpoenas Seek?
The first step in any fraud investigation is to gather as much evidence as possible that can be used to establish criminal intent. A violation of the antifraud provisions of the federal securities laws requires the government to prove the defendant acted “willfully,” so while there is rarely a dispute about what happened, the crucial issue is almost always about what the parties intended.
It is not clear what documents Goldman has that it did not produce to the government in the earlier investigations. Prosecutors would be expected to seek e-mails, text messages and any recorded conversations that have not been turned over because they could reveal what employees were discussing in structuring transactions and dealing with other parties, an important component to proving fraudulent intent.
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