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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

Monday, October 31, 2011

Goldman Sachs Sued Again

For the second time, an Australian hedge fund is suing Goldman Sachs for $1 billion and damages for misleading the fund by lying about the performance of the securities they sold. The complaint also suggests that Goldman's betting against the securities helped them collapse.

Goldman uses the now familiar excuse that experienced hedge funds should recognize what they are buying. The funds at the center of the suit are the Timberwolf and Point Pleasant deals. The Levin/Coburn report discusses these securities in depth.

It is certainly too bad that this suit just makes the money go 'round and 'round the financial circle!

Goldman Sachs Sued By Hedge Fund For Knowingly Selling Toxic Mortgage-Backed Investments
By Bonnie Kavoussi - HuffPost

A new lawsuit accuses Goldman Sachs of purposely unloading $93 million in mortgage-backed securities it knew to be junk onto a client, then betting against those same securities in the lead-up to the financial crisis.

Basis Yield Alpha Fund, an Australian hedge fund, filed the lawsuit against Goldman Sachs on Thursday, asking for more than $1 billion in damages. The lawsuit alleges that Goldman Sachs overcharged for two sets of mortgage-backed securities that it sold to Basis; lied about the securities' expected performance; did not provide timely, accurate information about the securities' true value; and failed to disclose that the firm was actively betting against the securities at the time of the transaction -- all which the hedge fund says contributed to its collapse.

"They were lying to clients in order to get junk off their books," said Eric Lewis, the Washington-based attorney who is leading the Basis Fund's lawsuit against Goldman. "They were basically selling a time bomb ... and what they sold blew up in our face, but what they couldn't sell blew up in their face."

Goldman Sachs declined to comment on whether they believed at the time that the securities in question were a legitimately good investment. In a statement, they denied any wrongdoing and noted that Basis was an experienced hedge fund.

"We believe that we acted appropriately and refute in the strongest possible terms any suggestion that Basis Capital was misled in any way," Goldman Sachs said in the statement. "Goldman Sachs was also an investor in Timberwolf securities and lost several hundred million dollars."

Asked specifically for details on Goldman's net position on the Timberwolf deal, Goldman Spokesman Michael DuVally declined to comment. But the firm did short about 35 percent of the security, according to an April report by the Senate's Permanent Subcommittee on Investigations that details Goldman's development of the now infamous Timberwolf securities, a bet that would reap Goldman significant gains.

And the firm had been shorting the housing market long before selling Basis the two mortgage-backed securities. By February 2007, it had a $10 billion net short position on the housing market, according to the Senate report.

Lewis said that Goldman lost money on the Timberwolf securities only because they eventually were unable to find customers. And Goldman's bet on the failure of the securities suggests, Lewis said, the firm had designed the securities to fail.

Goldman sought to sell the Timberwolf security at inflated prices as quickly as possible, the Senate report suggested, because they knew that the vehicle's assets would plummet in value as the housing market crumbled. And just as Goldman promised Basis that the Timberwolf mortgage-backed security would provide a 60 percent return on the investment, according to the report, a Goldman executive privately called the investment "one shitty deal."

The Senate report also found that Goldman didn't disclose the poor performance of the Point Pleasant vehicle, which it had sold to Basis a few months before the Timberwolf deal, so that it could successfully peddle the Timberwolf securities to the Australian firm. According to the Senate report, Goldman sold Timberwolf to Basis at significantly higher prices than they were internally valuing the securities. Soon after selling the securities, Goldman demanded collateral from Basis several times in order to cover for the securities' plummeting price.

The Basis Fund filed a similar suit against Goldman in June 2010, but a U.S. district court dismissed the suit in July since the Australian hedge fund was not able to prove that its purchases from Goldman were made in the United States. Basis filed its lawsuit on Thursday to the New York County Supreme Court, rather than in the federal court system, in order to sidestep that complaint.

Basis Lawsuit Against Goldman Sachs

You can read the rest of the article and see the lawsuit document here


Guest said...

A Simple Three-Item Agenda for "Occupy Wall Street/We Are 99%"

October 31, 2011     (Mobile version)

There are really only three ways to cripple Wall Street's democracy-killing concentration of wealth and power: take our money out of Wall Street and the TBTF banks, eliminate private money from elections and abolish Wall Street's dealer, the Federal Reserve.

There are only three things--and only these three--that will cripple Wall Street's democracy-killing concentration of wealth and power:

1. Transfer the 99%'s money out of Wall Street and the Too Big To Fail Banks

2. Remove campaign contributions from our democracy in a way that the corporate legalist lackeys in the Supreme Court cannot overturn, i.e. entirely publicly financed elections

3. Abolish Wall Street's dealer, pusher and protector, the Federal Reserve.

money for nothing said...

Corzine Crashes Like It’s 2008

But I’m going to complain anyway. The idea that Corzine, who single-handedly destroyed MF Global Holdings, was in a position to command so much as a penny in severance is horrifying. It suggests two things. The first is the extent to which “heads-I-win-tails-you-lose” remains the operative concept for Wall Street compensation. The second is that one’s politics doesn’t much matter when it comes to lining one’s pockets. Corzine is an avowed liberal who has decried income inequality and Wall Street pay — but right up until the end, he had his hand out for millions he didn’t deserve.

Part of the plan said...

and populations are but pawns in their games. Millions die in wars,
infrastructures are destroyed, and while the world mourns, the bankers
are counting their winnings and making plans for their postwar
reconstruction investments.
their position of power, as the financiers of governments, the banking
elite have over time perfected their methods of control. Staying always
behind the scenes, they pull the strings controlling the media, the
political parties, the intelligence agencies, the stock markets, and the
offices of government. And perhaps their greatest lever of power is
their control over currencies. By means of their central-bank scam, they
engineer boom and bust cycles, and they print money from nothing and
then loan it at interest to governments. The power of the elite banking
gang (the ‘banksters’) is both absolute and subtle...
of the biggest men in the United States are afraid of something. They
know there is a power somewhere, so organised, so subtle, so watchful,
so interlocked, so complete, so pervasive that they had better not speak
above their breath when they speak in condemnation of it. – President Woodrow Wilson
The End of Growth – Banksters vs. Capitalism
was always inevitable, on a finite planet, that there would be a limit
to economic growth. Industrialisation has enabled us to rush headlong
toward that limit over the past two centuries. Production has become
ever more efficient, markets have become ever more global, and finally
the paradigm of perpetual growth has reached the point of diminishing
that point was actually reached by about 1970. Since then capital has
not so much sought growth through increased production, but rather by
extracting greater returns from relatively flat production levels. Hence
globalisation, which moved production to low-waged areas, providing
greater profit margins. Hence privatisation, which transfers revenue
streams to investors that formerly went to national treasuries. Hence
derivative and currency markets, which create the electronic illusion of
economic growth, without actually producing anything in the real world.

Anon said...

Corzine He ran the Government bond desk when I worked at Goldman Sachs in the late 1980's. I was in the fixed income division and was, on occasion, peripherally in strategy meetings he was leading.  I can recall vividly thinking, "here's the kind of guy who would trade his mother for a nickel."  Corzine is emblematic of the blood-sucking greed and corruption that has enriched many connected to Wall Street. Corzine should spend time in jail for this situation at MF.  Unfortunately, through his political and business careers, he has made plenty of friends in high places, including many in key positions in the Obama administration, who will make sure he walks from all of this with nothing more than a slightly bruised ego.  Oh, he will take away another $12 million from MF based on his compensation  agreement as he walks out the door and hands the entire multi-billion dollar bailout tab to U.S. Taxpayers.

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