Goldman Sachs Endured SEC’s Tough Questions


In the world of business, Goldman Sachs has been the most talked about this time. As a little background, The Goldman Sachs Group, Inc is a global investment banking and securities firm which engages in investment banking, securities services, investment management and other financial services primarily with institutional clients.

Monday, the company reported its first quarter earnings and it has revealed $3.5 billion profit. However, these results has not alleviate the scrutiny it faces. Days ago, the Securities and Exchange Commission (SEC) has filed a civil suit against Goldman, alleging that the New York City-based company allowed hedge fund Paulson & Co., who made billions of dollars betting against the U.S. mortgage market, to help select securities in a so-called collateralized debt obligation, or CDO. They also charged Goldman with failing to tell investors that Paulson was betting that the value of the investment would decline. Investors in the security ultimately lost $1 billion accordingly.

Executives of Goldman primarily reject SEC’s allegations and standing firm that Paulson never had a hand in selecting the securities and that the other investors in the deal were never deceived in any way.

Greg Palm, Goldman’s co-general counsel said, “We would never intentionally mislead anyone”. The company also mentioned that the two lone investors in the fund – German bank IKB and bond insurer ACA Capital – did their own extensive research. He also added that Goldman has had no “conversations” beyond the SEC’s civil charges.

As of the moment, the company has made it clear that has every intention of fighting the government’s charges and called it “unfounded”, adding that they planned to “vigorously contest” them.

Goldman Sachs 2010 First Quarter Report: Profit Reaching $3.5 Billion

First Quarter of this year, covering up months of January to March, Goldman Sachs company reported an astonishing $3.5 billion profit. It also added that it paid its employees about $5.5 billion in compensation, equivalent to 43% of its revenue.

It was just last week when the firm has been charged by SEC (Security Exchange Commission) with defrauding investors in a sale of a so-called collateralized debt obligation, or CDO. Investors told SEC that their loss reached ultimately reached $1 billion.

SEC said that Goldman failed to disclose “vital information” that one of its clients, Paulson & Co, had helped to choose which securities were packaged into the mortgage portfolio. These securities were sold to investors in 2007. Goldman has strongly rejected the SEC’s claims as wrong “in fact and law”.

If the allegations of SEC would be proven true, Goldman will then be paying fines for it. The Financial Service Authority (FSA) will then be liaising the investigation between SEC and the Goldman Sachs.

As to the side of the company, chief executive Lloyd Blankfein said in a statement, “In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people,”

“Our performance in the first quarter reflects more signs of growth across the economy and the strength of our client franchise,” Blankfein said.

The company has acknowledged the suit against them and chief financial officer David Viniar, as well as Goldman’s co-general counsel, has been planning to address the SEC complaint during a conference call with investors at 8 a.m. ET.