Last month, the Securities and Exchange Comission(SEC) announced it was suing global investment bank Goldman Sachs for fraud, after a number of mortgage investors suffers heavy financial losses when deals went sour.
The SEC claims that Goldman Sachs and a number of its employees – notably, vice-president Fabrice Tourre – defrauded its investors through a failure to disclose their conflict of interest on mortgage investments.
In the civil complaint lawsuit the SEC filed, Goldman Sachs are accused of misrepresenting, misstating and omitting crucial facts about subprime mortgage investments to buyers in one deal, particularly that another party involved in the deal was actually betting against them. The SEC allege that Goldman Sachs made around $15 million in fees from this, whilst investors lost money.
Forbes.com has summed up the essence of the SEC’s lawsuit, saying that
“Goldman pushed a product designed to fail.”
This case isn’t the first controversial dispute Goldman Sach’s professional indemnity insurance policy has had to cover in the last year or so; there have been other accusations of negligence, disclosure failures and fraud made of the firm recently. As well as tackling scrutiny over their role in the recent European debt crisis, Goldman also had to pay around $60 million in settlement payments to disgruntled mortgage investors in Massachusetts in 2009.