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Goldman Sachs pays $550m to settle fraud suit
Business Digest: Showdown comes to an end with only a ‘cheap’ fine for investment bank
Goldman Sachs has agreed to pay $550 million to settle the civil fraud suit brought by the US Securities and Exchange Commission (SEC) over its controversial Abacus 2007-AC1 deal.
The SEC alleged that the investment bank duped its clients by selling mortgage securities secretly designed by hedge-funders Paulson & Co to cash in on the collapse of the American housing market.
But while it is one of the largest fines in the history of Wall Street, it looked like a bargain to most observers. First, it brings to an end a showdown that threatened to undermine client relations. Second, such is the wealth of Goldman Sachs that the fine represents just 14 days of profits, based on first-quarter figures.
Goldman conceded it made "a mistake" by not disclosing Paulson's role in designing the Abacus deal. The bank pledged to toughen oversight of mortgage securities and employees who create or pitch such securities.
Read a full report at the Wall Street Journal. ·
