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?
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