Goldman’s fraud trial case will test the Supreme Court shaped by Trump

Photographer: Graeme Sloan / Bloomberg

The U.S. Securities and Exchange Commission filed Goldman Sachs Group Inc. shares. falling 13% in one day in 2010, when he accused the company of misleading buyers by selling them a mortgage-backed investment secretly designed to fail .

Eleven years later, shareholders lost that money April Day is before the U.S. Supreme Court in a case that could deal with an even worse blow to investors. In an argument set for Monday, Goldman Sachs urges the court to impose new limits on class action shareholder positions, and throws out a case that seeks to raise billions of dollars. back.

Investment advocates say they are nervous ahead of the first High Court lawsuit over a shareholder lawsuit since former President Donald Trump imposed three judgments and created retention majority 6-3. The court is expected to rule by the end of June.

“I am very concerned, and very concerned about where this particular court will come out,” said Lynn Turner, former chief accountant of the SEC.

The investors, led by the Arkansas Teachers Retirement System, saying they were deceived by Goldman Sachs public promises again that it was going to be vigilant about avoiding conflicts of interest. They say the pledges were proven fraudulent, as details of a group of collateralized debt liabilities, known as CDOs, included an Abacus package that was at the center of the SEC suit. .

The SEC stated in its lawsuit that Goldman created and sold Sachs Abacus without disclosing that the hedge fund Paulson & Co. helped. by selecting the basic securities and placing a bet against the vehicle.

Later that year, Goldman paid $ 550 million to settle with the SEC, the highest rate for a Wall Street company. Although Goldman did not admit wrongly, the company said it made a “mistake” by not disclosing the role of Paulson & Co., an unusual identity in the SEC case.

Email blunt

Wall Street peddling of CDOs remains a cornerstone of the global financial crisis, evidence for many that the interests of clients came second to the huge profits that banks were making for themselves. Much of the 2008 economic downturn was fueled by losses suffered by banks and hedge funds that held the complex securities. Eventually, the U.S. government had to fund a $ 700 billion grant in tax payments for the financial industry.

Investigations by the SEC, Congress and the Department of Justice continued swiftly, causing a fall in the share prices of Goldman Sachs and other banks at the time.

Goldman featured in a scathing report on CDOs by a Senate panel, and former chief executive Lloyd Blankfein was among several employees slammed. up to Capitol Hill for confirmation. At a hearing in 2010, the now-retired chairman of the panel, Michigan Democrat Carl Levin, sent a taste of the executives over an internal email that was referred to as one of the securities that Goldman sold as “one sh ** ty deal. ”

“Your people think it’s a piece of it crap and go out and sell it, ”Levin said at the hearing. “We’re talking about betting on exactly what you’re selling, without revealing that to your client.”

The Supreme Court case is based on the rules the court has designed to determine whether shareholders have in common with each other enough to inflict a fraudulent suit as a class action.

Impact of stock

In 1988, the main court ruled that judges can assume that all investors were liable for any public misrepresentation when they purchased shares. But that A ruling also said that defenders can oppose that view – and prevent the verification of class action – by showing that the statements had no effect on share prices.

Goldman Sachs says its promises of conflict were so “universal” that they could not possibly rely on a rise in stock prices. The statements included commitments in regulatory films that the company had “comprehensive procedures and controls designed to identify and address conflicts of interest and that the interests of our employees always comes first. ”

“The sheer generality of the false statements makes it highly unlikely that the statements had any effect on the price of the stock,” Goldman told the Supreme Court in court papers.

But a divided federal appeals court said the bank had to wait to make that argument and could not use it as a reason to block class action status. A majority of two judges said Goldman was inappropriately “smuggling” an argument about the appropriateness of his statements into the class action study.

Biden in the middle

Suing investors have partial support from the administration of President Joe Biden and the SEC. The government says the appellate court should have considered Goldman’s argument that his promises were too sexual to raise the share price. But the U.S. also says Goldman and its allies are going too far in seeking a definitive rule that some statements are legally incapable of affecting stock.