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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

Friday, April 13, 2012

Goldman Sachs Takes Reno

Reno alleges that Goldman Sachs committed fraud when it was persuaded by Goldman to issue $210 million in bonds that were supposed to be safe.  Reno is asking FINRA to arbitrate "to recover the damages it sustained due to Goldman's misrepresentations and omissions."

The auction rate securities sold to Reno had a higher risk than the bank disclosed.  Reno is left with extra fees and interest payments when they refinanced through Goldman.  The article explains here how auction rate securities worked with the help of the banks.  Reno could face default if an agreement cannot be made with Goldman Sachs.

Conclusion:  No city should want to use Goldman Sachs as its bank of choice.
Reno takes on Goldman Sachs
City alleges bank misrepresented risk
By Brian Duggan -

 Reno is suing Goldman Sachs, alleging fraud against one of Wall Street’s largest investment firms.
The city claims Goldman persuaded Reno to issue $210 million in bonds in a specialized market that the bank claimed was safe even though it knew it could turn toxic.

Reno is seeking arbitration against the bank through the Financial Industry Regulatory Authority, basically a private court for financial institutions.

Reno seeks “to recover the damages it sustained due to Goldman’s misrepresentations and omissions” when the city issued the bonds on the so-called “auction rate securities” market in 2005 and 2006 for its downtown events center and railroad trench projects, according to complaint filed in February.
Goldman Sachs declined to comment for this article.

The saga over auction rate securities is just one of many financial crises Reno currently faces. This includes distressed redevelopment debt that’s teetering on default and falling revenues that have forced it to cut city staff, including firefighters and police, by about a third since 2009.

Joe Peiffer, an attorney with the New Orleans-based law firm Fishman Haygood Phelps that was hired in December to represent Reno, said Wednesday those damages could total into the “multiple millions” of dollars.
Read the entire article here 


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