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On April 16, the SEC:
"charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the US housing market was beginning to falter."
Allegations are:
"that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund (Paulson & Co.) played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO" - junk assets its president, John Paulson, made $4 billion on in 2007 by correctly betting on the housing collapse he and GS helped initiate.
"The SEC's complaint charges Goldman Sachs and Touree with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, and financial penalties."
Fabrice Touree was "principally responsible" for the fraud and sent an email before they were sold saying:
"the whole building is about to collapse anytime now," calling himself the "Only potential survivor, the fabulous Fab....standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those 'monstruosities!!!' "
According to the SEC, he wasn't alone as senior GS executives signed off on them. Likely, but unnamed, they include CEO Lloyd Blankfein - profiled on November 8, 2009 in the London Sunday Times saying "I'm doing 'God's work,' " the height of audacity matching the firm's history of criminality and getting away with it.
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