Legal News

LB Goldman/SEC Roundup: ?Fab? Steps Aside, GS Tells Its Story

By Ashby Jones

Let’s round up the news on the Goldman/SEC suit; get you all up to speed on where we are.

First, just a quick reminder, prompted by overhearing too many conversations in the last few days in which folks will says: “I think Goldman’s guilty,” or “There’s no way the SEC is going to get a conviction in this.” This suit, while it’s indeed brought by the government, is a civil suit brought by the SEC, not a criminal suit. The SEC does not have the ability to bring criminal charges. So, even if the SEC wins everything in this case, nobody is going to jail (at least not as a result of this lawsuit). There will be no guilty plea, no conviction, no perp walks. If the SEC wins everything in this case, it will be able to levy fines against Goldman, make Goldman cough up whatever it was alleged to have made in the deal (if anything), and possibly win some “injunctive” relief, like getting Goldman to agree to refrain from certain practices going forward.

Okay, sorry if that paragraph was received as an insult to your collective intelligence, but we had it get it off our chest. Now, to the news.

For starters, “Fabulous Fab” Fabrice Tourre, the Goldman banker and only individual named in the SEC’s suit, has decided to take some time away from his job, reports the WSJ. The 31-year-old Frenchman did not show up to his London office on Monday. No word when he’ll be back.

Goldman has spoken again, issuing its third public statement since the lawsuit dropped on Friday. Click here for coverage, from the WSJ’s Deal Journal.

Goldman spoke earlier — back in September of last year — when it tried to persuade the SEC not to bring suit. Click here for an overview of the bank’s response to the SEC’s “Wells notice,” from the WSJ’s Deal Journal. The post links to the document.

The SEC might not be done. The WSJ reports on Monday that the commission is investigating whether other mortgage deals arranged by some of Wall Street’s biggest firms may have crossed the line into misleading investors. Among the firms that created mortgage deals that soon went sour were Deutsche Bank, UBS, and Merrill Lynch & Co., now owned by Bank of America Corp. It isn’t known what deals the SEC is investigating.

Much ado about nothing? The WSJ’s editorial board thinks so, saying: “far from being the smoking gun of the financial crisis, this case looks more like a water pistol.”

Sullivan & Cromwell v. ??? It’s been out there since Friday that Sullivan & Cromwell has been carrying Goldman’s water on the legal end — namely partners Richard Klapper and Michael Tomaino. But thanks to WSJ SEC reporter Kara Scannell, we now know a little more about the SEC’s lead lawyer. His name’s Reid Muoio (nine letters, three consonants, six vowels). Muoio, 43, is a Yale Law grad, worked at Hughes Hubbard for a while and yes, plays the ukelele. He’s currently the deputy chief of the structured-products unit.

A 3-2 Vote: According to Bloomberg, the five SEC commissioners voted 3-2 along party lines to approve the case against Goldman. Republican Commissioners Kathleen Casey and Troy Paredes voted against making the charges against Goldman Sachs. Elisse Walter and Luis Aguilar, both Democrats, joined SEC chair Mary Schapiro and voted in favor of the charges.

Full post as published by Law Blog - WSJ.com on April 19, 2010 (boomark / email).