SEPTEMBER 7, 2011
Probe Into Goldman Widens
By STEVE EDER, MICHAEL ROTHFELD and AARON LUCCHETTI
wsj.com
Prosecutors in New York are pressing ahead with their inquiry into the way Goldman Sachs Group Inc. marketed certain mortgage-linked instruments before the financial crisis, issuing subpoenas to Morgan Stanley and other investors in the deals, people familiar with the matter said.
Some of the subpoenas were received in recent weeks, the people said. The Manhattan district attorney's office began its probe into Goldman following the release in April of a U.S. Senate subcommittee report into the causes of the crisis. Goldman was featured prominently in that report.
The district attorney's office previously had subpoenaed Goldman, requesting several months ago a series of documents and communications about the deals, which were put together in the mid- to late-2000s, one person familiar with the matter said at the time.
The prosecutor's requests to investors, including some hedge funds, concerned how Goldman sold the deals, a person familiar with the matter said.
Subpoenas aren't an indication of wrongdoing; they are formal requests for information and don't necessarily mean that charges are forthcoming or even likely.
A spokeswoman for the district attorney's office declined to comment, as did a Goldman spokesman.
While Goldman agreed to pay $550 million last year to settle Securities and Exchange Commission allegations that the bank misled clients on one such mortgage-linked security, a collateralized-debt obligation called Abacus, the Senate report said Goldman deceived clients in other CDO deals. The Senate Permanent Subcommittee on Investigations in turn referred its findings to the Justice Department. Goldman didn't admit or deny any wrongdoing.
A Goldman spokesman at the time said that "while we disagree with many of the conclusions of the report, we take seriously the issues explored by the subcommittee," adding that the firm examined its business standards and practices and has committed to making significant changes to strengthen its disclosure and client relationships. A spokeswoman for the Justice Department declined to comment.
That report also prompted Manhattan prosecutors to review Goldman's actions, and about three months ago they subpoenaed the bank for information related to the Senate subcommittee's findings, a person familiar with the matter said at the time.
The Manhattan district attorney's office is led by Cyrus Vance Jr. Now in his second year on the job, Mr. Vance has put an emphasis on economic crimes, creating the Major Economic Crimes Bureau, which is designed to investigate securities and investment frauds, international money laundering, and terrorism financing.
Before the financial crisis, banks created financial instruments that allowed investors to bet on or against the U.S. housing market. When the housing market collapsed, state and federal regulators began to focus on whether banks were conflicted in their promotion of these financial instruments.
They also have looked at the roles that hedge funds played in designing the instruments, and whether their function was adequately disclosed.
The unresolved crisis-era legal headaches have added to a litany of investors' fears, weighing on Goldman shares since the spring.
The stock has tumbled 37% this year amid concerns about a weak economy and that financial-regulatory overhauls would crimp banks' profits.
Full story: http://online.wsj.com/article/SB10001424053111903648204576554931375155722.html?mod=WSJ_hp_LEFTWhatsNewsCollection
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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