Hello students,
From my review of a few articles concerning Goldman's alleged securities violations, it appears they will be classic rule 10B-5 claims. Basically, plaintiffs allege that Goldman either negligently or knowingly sold risky securities as sound investments. I believe there will also be common law as well as other claims associated with Goldman's sale of one of its client's products without adequate investigation--an apparent conflict and arguable self-dealing scenerio. Below is a recent story concerning the cases:
ABC News has obtained sales literature that Goldman Sachs used to push the controversial mortgage product that has them in trouble with the SEC.
The investment giant comes out swinging against fraud allegations.In the sections on risk and disclaimers there is no mention that the product had been partly engineered by another Goldman client -- which, the SEC charges, designed it with the expectation it would fail.
Still, these are just allegations, and now there are new signs Goldman Sachs plans to come out swinging.
Executives at Goldman sent out an internal memo reading, "...we believe that the firm's actions were entirely appropriate, and will take all steps necessary to defend the firm."
But those words come after the bombshell allegations Friday that Goldman allegedly duped clients into investing in a mortgage product put together by another one of Goldman's own clients.
The SEC says that client is hedge fund giant John Paulson, which was allegedly looking to profit when the product then failed as planned.
Related
WATCH: Obama: More Financial Reform NeededFeds Charge Goldman Sachs With FraudCalif. Pension Fund to Examine Goldman PracticesFederal regulators say investors lost more than $1 billion.
In taking on Goldman Sachs, the SEC is facing off against Wall Street's giant, a bank with powerful ties to Washington.
Two recent Treasury Secretaries came from the bank, Secretary Robert Rubin and Secretary Hank Paulson.
Duff McDonald, author of the book "Last Man Standing," says there is no question Goldman is the most powerful bank on Wall Street.
"Regulators, politicians, the public are out for scalps and Goldman is the biggest scalp of all," he says.
And they know it.
Over the weekend Goldman CEO Lloyd Blankfein left a voicemail for his employees in which he said, "The extensive media coverage on the SEC's complaint is certainly uncomfortable, but given the anger directed at financial services, not completely surprising."
Industry insiders say there is outrage inside the bank, along with a belief that Goldman is being made a scapegoat for the kind of product that was pushed by many of the biggest investment banks.
Gregory Zuckerman, author of "The Greatest Trade Ever" says this investment was not a secret at the bank. "What will be interesting is to see is whether senior people knew how this deal was sold to investors," he says.
Thursday, April 22, 2010
Here is a Hypo you may find useful...
In 1996, Abe and Bess formed by oral agreement a real estate investment partnership. Their agreement was so informal that it amounted to little more than a mutual promise to carry on the business as co-owners for five years.
Abe was by his own account "independent minded and strong willed." Bess styled herself "sensitive and refined." Because the partners shared a small office, they became acutely aware of these character differences. Matters came to a head in 1999 when Bess demanded that Abe stop listening to talk-radio shows at the office. "That inane drivel drives me to distraction!" she complained. Abe tossed her ear-plugs. "How about some nose plugs, too?" said Bess sarcastically, "Your cologne makes me sick." Abe offered Bess another set of earplugs. "I think you know where you can put these," he grinned.
Bess snapped. "I cannot work with such a pig-headed pile of, of . . . hot air!" she shrieked, and stormed out of the office. She left for an extended vacation. A month passed, and still Bess had not informed Abe where she had gone or when she would return.
A. Characterize the relationship between Abe and Bess at this point.
Another month passed. Abe, overwhelmed by a double workload and worried about Bess, suffered a fatal heart attack. Bess returned the next day.
B. Building on your response to sub-question A, above, characterize the relationship between Abe's estate and Bess at this point.
To help get their business started, Abe had contributed 1,000 shares of Yowza, Inc. to the partnership and Bess had contributed 1,000 shares of Zydex, Inc. These contributions had had roughly equal value in 1996. Abe and Bess had placed these contributions in the partnership's name to serve as collateral for loans taken out to start the business. None of the shares were sold. By 1999, the Yowza shares had tripled in value whereas the Zydex shares had declined 30% in value. Abe's estate wants his stock back, whereas Bess wants all the stock sold and the proceeds divided equally.
C. Who should prevail and why?
Abe was by his own account "independent minded and strong willed." Bess styled herself "sensitive and refined." Because the partners shared a small office, they became acutely aware of these character differences. Matters came to a head in 1999 when Bess demanded that Abe stop listening to talk-radio shows at the office. "That inane drivel drives me to distraction!" she complained. Abe tossed her ear-plugs. "How about some nose plugs, too?" said Bess sarcastically, "Your cologne makes me sick." Abe offered Bess another set of earplugs. "I think you know where you can put these," he grinned.
Bess snapped. "I cannot work with such a pig-headed pile of, of . . . hot air!" she shrieked, and stormed out of the office. She left for an extended vacation. A month passed, and still Bess had not informed Abe where she had gone or when she would return.
A. Characterize the relationship between Abe and Bess at this point.
Another month passed. Abe, overwhelmed by a double workload and worried about Bess, suffered a fatal heart attack. Bess returned the next day.
B. Building on your response to sub-question A, above, characterize the relationship between Abe's estate and Bess at this point.
To help get their business started, Abe had contributed 1,000 shares of Yowza, Inc. to the partnership and Bess had contributed 1,000 shares of Zydex, Inc. These contributions had had roughly equal value in 1996. Abe and Bess had placed these contributions in the partnership's name to serve as collateral for loans taken out to start the business. None of the shares were sold. By 1999, the Yowza shares had tripled in value whereas the Zydex shares had declined 30% in value. Abe's estate wants his stock back, whereas Bess wants all the stock sold and the proceeds divided equally.
C. Who should prevail and why?
Tuesday, March 30, 2010
V.G. Part II?
Jay Pritzker, Who Built Chain Of Hyatt Hotels, Is Dead at 76
By ANTHONY RAMIREZ
Published: January 25, 1999
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Jay Pritzker, whose hunch in the 1950's that America's restless business executives would flock to hotels near airports prompted him to build the Hyatt hotel chain, died on Saturday of cardiac arrest at Northwestern Memorial Hospital in Chicago. Mr. Pritzker, who had a history of heart trouble, was 76.
Despite a personal aversion to publicity, Mr. Pritzker and his brother Robert were routinely celebrated on the world's financial news pages for their business acumen.
But Mr. Pritzker, his wealthy family and their business empire were also involved in controversy and conflict. The Internal Revenue Service accused the family of trying to avoid taxes on the estate of Mr. Pritzker's father. After Government regulators struck deals with Mr. Pritzker and other investors to aid troubled savings and loan associations, many of those deals were criticized in Congress as being too generous. And Mr. Pritzker became one of the best-known corporate raiders of the 1980's.
As two of the world's richest men, Jay and Robert Pritzker built their company, the Marmon Corporation, into a conglomerate that over the years had interests in Braniff Airlines, McCall's magazine, Levitz Furniture and Ticketmaster as well as casinos in Las Vegas and Lake Tahoe, Nev., and Atlantic City. Last year, Forbes magazine estimated the brothers' net worth at $13.5 billion, up from $6 billion the year before.
Jay Pritzker was a trustee of the University of Chicago and in 1979 endowed the Pritzker Architectural Prize, sometimes called architecture's Nobel Prize, which carries a $100,000 award. He also founded the Nancy Friend Pritzker Laboratory for the study of clinical depression at Stanford University. It is named for his daughter.
A lawyer and accountant by training, Mr. Pritzker began buying small companies when he was 29, first timber mills, then a small metal-goods company. But he was best known for the business deal he hatched in 1957 over a cup of coffee at a coffee shop called Fat Eddie's at Los Angeles International Airport.
While waiting for a flight, Mr. Pritzker noticed that Fat Eddie's seemed to be unusually busy, and that the hotel in which it was situated did not have any vacancies. The hotel -- named after its owner, Hyatt von Dehn -- was for sale, and Mr. Pritzker decided on the spot to buy it and Fat Eddie's, writing his offer of $2.2 million on a napkin.
Mr. Pritzker bet, correctly, that business executives like himself would want to stay at a high-quality hotel near a large airport. The Hyatt was ''simply the first first-class hotel that I had ever seen at an airport,'' Mr. Pritzker later told The Chicago Daily News.
After building a second Hyatt hotel in Burlingame, Calif., near San Francisco International Airport, the brothers went on to develop properties near airports in Los Angeles, San Francisco and Seattle, then around the country and internationally. The Hyatt Hotels Corporation, which last year had revenue of $3 billion, has 182 hotels, with 34 under construction.
''He had a lot of guts,'' said Douglas G. Geoga, president of the Hyatt Hotels subsidiary, recalling that Mr. Pritzker in 1967 bought a half-finished hotel in Atlanta and turned it into the Hyatt Regency. The first of the giant atrium hotels, the Hyatt Regency Atlanta struck doubters as a white elephant, Mr. Geoga said.
Mr. Pritzker, he recalled, said that some visitors were actually worried that the Regency's atrium was so tall that hot air would rise, condense and form a miniature rainstorm inside the hotel. Mr. Pritzker liked to gently scoff that ''that sort of concern reflected a degree of overeducation,'' Mr. Geoga said.
Despite the Pritzker clan's wealth, after Mr. Pritzker's father, Abram Nicholas Pritzker, died in 1986, his heirs contended that no estate taxes were due. They noted that for years the elder Mr. Pritzker had been shifting his assets into trusts in the Bahamas that held the assets on behalf of his children and grandchildren. His heirs said that when he died, he no longer owned enough to owe any taxes.
The I.R.S. called the trusts a sham and sent a bill for $53.2 million. But in 1994 it settled with the Pritzkers for $9.5 million plus interest. One of the I.R.S.'s problems was that the Bahamas has strict secrecy laws, and it could not get enough records to accurately place a value on the holdings.
Also in the 1980's, the ITT Corporation staved off a hostile takeover bid begun by Mr. Pritzker, who was flexing his raiding muscle.
In the same decade, after loosened lending rules and a real estate collapse left many savings and loan associations buried in bad loans, regulators decided that the cheapest way to heal the lenders was to encourage them to merge with healthier institutions or find new investors. That was why regulators struck deals with Mr. Pritzker and others -- and the Congressional criticism followed.
In 1996, the Supreme Court ruled that the Government had betrayed investors by changing the rules of the bailout at the height of the savings and loan crisis. In November 1998, Mr. Pritzker was among those who sought billions of dollars through civil lawsuits contending that Washington had unfairly changed the deals' terms by ending a favorable accounting practice.
And the Pritzker family's 17-year partnership with Donald J. Trump in the Grand Hyatt Hotel in New York was often rancorous. The two sides wrestled over the management of the property and sued each other in the early 1990's before Mr. Trump sold his half interest to the Hyatt Corporation for $140 million in 1996.
Jay Pritzker was born on Aug. 26, 1922, to Fanny Doppelt and Abram Nicholas Pritzker and was the grandson of Nicholas and Annie Pritzker.
Mr. Pritzker majored in accounting and received a bachelor's degree from Northwestern University in 1941. His grandfather founded a Chicago law firm, now called Pritzker & Pritzker, where Jay Pritzker worked for a time after graduating from Northwestern University Law School in 1947 and serving in World War II as a naval aviator.
Mr. Pritzker is survived by his wife, Marian, their four children and 13 grandchildren and his brother, Robert.
Mr. Pritzker's brother Donald and his oldest child, Nancy, died in 1972.
Photo: Jay Pritzker (Associated Press, 1992)
By ANTHONY RAMIREZ
Published: January 25, 1999
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Jay Pritzker, whose hunch in the 1950's that America's restless business executives would flock to hotels near airports prompted him to build the Hyatt hotel chain, died on Saturday of cardiac arrest at Northwestern Memorial Hospital in Chicago. Mr. Pritzker, who had a history of heart trouble, was 76.
Despite a personal aversion to publicity, Mr. Pritzker and his brother Robert were routinely celebrated on the world's financial news pages for their business acumen.
But Mr. Pritzker, his wealthy family and their business empire were also involved in controversy and conflict. The Internal Revenue Service accused the family of trying to avoid taxes on the estate of Mr. Pritzker's father. After Government regulators struck deals with Mr. Pritzker and other investors to aid troubled savings and loan associations, many of those deals were criticized in Congress as being too generous. And Mr. Pritzker became one of the best-known corporate raiders of the 1980's.
As two of the world's richest men, Jay and Robert Pritzker built their company, the Marmon Corporation, into a conglomerate that over the years had interests in Braniff Airlines, McCall's magazine, Levitz Furniture and Ticketmaster as well as casinos in Las Vegas and Lake Tahoe, Nev., and Atlantic City. Last year, Forbes magazine estimated the brothers' net worth at $13.5 billion, up from $6 billion the year before.
Jay Pritzker was a trustee of the University of Chicago and in 1979 endowed the Pritzker Architectural Prize, sometimes called architecture's Nobel Prize, which carries a $100,000 award. He also founded the Nancy Friend Pritzker Laboratory for the study of clinical depression at Stanford University. It is named for his daughter.
A lawyer and accountant by training, Mr. Pritzker began buying small companies when he was 29, first timber mills, then a small metal-goods company. But he was best known for the business deal he hatched in 1957 over a cup of coffee at a coffee shop called Fat Eddie's at Los Angeles International Airport.
While waiting for a flight, Mr. Pritzker noticed that Fat Eddie's seemed to be unusually busy, and that the hotel in which it was situated did not have any vacancies. The hotel -- named after its owner, Hyatt von Dehn -- was for sale, and Mr. Pritzker decided on the spot to buy it and Fat Eddie's, writing his offer of $2.2 million on a napkin.
Mr. Pritzker bet, correctly, that business executives like himself would want to stay at a high-quality hotel near a large airport. The Hyatt was ''simply the first first-class hotel that I had ever seen at an airport,'' Mr. Pritzker later told The Chicago Daily News.
After building a second Hyatt hotel in Burlingame, Calif., near San Francisco International Airport, the brothers went on to develop properties near airports in Los Angeles, San Francisco and Seattle, then around the country and internationally. The Hyatt Hotels Corporation, which last year had revenue of $3 billion, has 182 hotels, with 34 under construction.
''He had a lot of guts,'' said Douglas G. Geoga, president of the Hyatt Hotels subsidiary, recalling that Mr. Pritzker in 1967 bought a half-finished hotel in Atlanta and turned it into the Hyatt Regency. The first of the giant atrium hotels, the Hyatt Regency Atlanta struck doubters as a white elephant, Mr. Geoga said.
Mr. Pritzker, he recalled, said that some visitors were actually worried that the Regency's atrium was so tall that hot air would rise, condense and form a miniature rainstorm inside the hotel. Mr. Pritzker liked to gently scoff that ''that sort of concern reflected a degree of overeducation,'' Mr. Geoga said.
Despite the Pritzker clan's wealth, after Mr. Pritzker's father, Abram Nicholas Pritzker, died in 1986, his heirs contended that no estate taxes were due. They noted that for years the elder Mr. Pritzker had been shifting his assets into trusts in the Bahamas that held the assets on behalf of his children and grandchildren. His heirs said that when he died, he no longer owned enough to owe any taxes.
The I.R.S. called the trusts a sham and sent a bill for $53.2 million. But in 1994 it settled with the Pritzkers for $9.5 million plus interest. One of the I.R.S.'s problems was that the Bahamas has strict secrecy laws, and it could not get enough records to accurately place a value on the holdings.
Also in the 1980's, the ITT Corporation staved off a hostile takeover bid begun by Mr. Pritzker, who was flexing his raiding muscle.
In the same decade, after loosened lending rules and a real estate collapse left many savings and loan associations buried in bad loans, regulators decided that the cheapest way to heal the lenders was to encourage them to merge with healthier institutions or find new investors. That was why regulators struck deals with Mr. Pritzker and others -- and the Congressional criticism followed.
In 1996, the Supreme Court ruled that the Government had betrayed investors by changing the rules of the bailout at the height of the savings and loan crisis. In November 1998, Mr. Pritzker was among those who sought billions of dollars through civil lawsuits contending that Washington had unfairly changed the deals' terms by ending a favorable accounting practice.
And the Pritzker family's 17-year partnership with Donald J. Trump in the Grand Hyatt Hotel in New York was often rancorous. The two sides wrestled over the management of the property and sued each other in the early 1990's before Mr. Trump sold his half interest to the Hyatt Corporation for $140 million in 1996.
Jay Pritzker was born on Aug. 26, 1922, to Fanny Doppelt and Abram Nicholas Pritzker and was the grandson of Nicholas and Annie Pritzker.
Mr. Pritzker majored in accounting and received a bachelor's degree from Northwestern University in 1941. His grandfather founded a Chicago law firm, now called Pritzker & Pritzker, where Jay Pritzker worked for a time after graduating from Northwestern University Law School in 1947 and serving in World War II as a naval aviator.
Mr. Pritzker is survived by his wife, Marian, their four children and 13 grandchildren and his brother, Robert.
Mr. Pritzker's brother Donald and his oldest child, Nancy, died in 1972.
Photo: Jay Pritzker (Associated Press, 1992)
Monday, March 8, 2010
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