Goldman Sachs’s CEO and other top officers are accused in a pair of shareholder lawsuits of lax oversight in deals involving risky mortage-backed securities that later went bad.
The lawsuits filed on Thursday in New York State Supreme Court name Lloyd Blankfein and the firm’s entire board of directors as defendants.
The suits follow civil fraud charges filed last week by the Securities and Exchange Commission (SEC) over the same investments.
The SEC says Goldman committed fraud by failing to disclose important information about the securities that might have scared off investors.
The two suits, filed by shareholders Robert Rosinek and Morton Spiegel, accuse Blankfein and other officers of “systematic failure” over three-and-a-half years for not properly vetting 23 mortgage-linked deals at the center of the SEC suit. Those deals, called Abacus, led to US$1 billion in losses.
A Goldman spokesman declined to comment.
The suits appear to be the first shareholder cases related to the Abacus deals. If so, they may mark the start of what legal experts expect will be a flood of shareholder cases against Goldman Sachs.
The plaintiffs seek unspecified monetary damages.
Goldman Sachs is preparing to defend itself against the US government allegations by arguing that it was unsure where housing prices were headed and did not act against its clients’ interests, the Washington Post reported on its Web site on Friday.
The Post reported that it had obtained an 11-page document that describes how top Goldman executives debated the future of the mortgage market in 2006 and 2007.
The document was drawn up as part of preparation for Blankfein’s testimony next week to the Senate Permanent Subcommittee on Investigations.
In one meeting outlined in the document, financial officer David Viniar met with Goldman’s mortgage traders and risk managers on Dec. 14, 2006, to discuss strategy. They decided to reduce Goldman’s exposure in the subprime market, the Post reported.
While Goldman did acknowledge shorting the overall market at times, the document says it was temporary and only during periods where Goldman was reshuffling its portfolio, the Post reported.
However, while making this shift, critics say, Goldman continued to sell mortgage-related investments to clients interested in the subprime loan market, the Post said.
Further, the document said that Goldman seriously considered making new mortgage investments at other times. In 2007, for example, managing director Richard Ruzika argued that Goldman was too pessimistic about the housing decline. Another executive made a similar statement as late as August 2007.
Also in the document, Goldman argued that it was a relatively small player in mortgages, making only US$500 million from the residential mortgage business in 2007 — about 1 percent of the firm’s revenues.
While the SEC probe continues, a US government watchdog said on Friday that it would investigate the SEC’s fraud lawsuit. Republicans have implied political motives were behind the SEC’s decision to sue Goldman.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS