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Goldman Sachs to pay record fine

Staff writer ▼ | July 15, 2013
Goldman Sachs agreed to pay a record 550 million dollars to settle government fraud charges, the Securities and Exchange Commission (SEC) said.
Goldman Sachs
Goldman SachsGoldman Sachs agreed to pay a record 550 million dollars to settle government fraud charges, the Securities and Exchange Commission (SEC) said.


Facing allegations of defrauding investors, Goldman Sachs admitted it had made a "mistake" and given "incomplete" information to clients.

The SEC had accused Goldman of allowing a hedge fund Paulson & Co. Inc to put together a package of subprime mortgages that were sold to clients, but which Paulson was also betting against.

"This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing," said SEC prosecutor Robert Khuzami.

Goldman Sachs said it would "vigorously contest" the charges and "defend the firm and its reputation" but in the newest statement it acknowledged that marketing materials for the product "contained incomplete information."

"It was a mistake for the Goldman marketing materials to state that the reference portfolio was 'selected by' ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process."

The company will pay 300 million dollars to the Treasury and 250 million to investors.

"Half a billion dollars is the largest penalty ever assessed against a financial services firm in the history of the SEC," said Mr. Khuzami.

After the settlement was announced Goldman said the deal was the "right outcome for our firm, our shareholders and our clients" and SEC staff did "not anticipate recommending any claims against Goldman Sachs or any of its employees with respect to those transactions based on the materials it has reviewed."


 

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