The documents detailing the findings of the investigation into the timing of the Goldman Sachs SEC case (which was suspiciously around the time of a push for stronger financial regulation and also the time the SEC revealed they screwed up investigating the Ponzi schemer Allen Stanford) revealed a number of new details about the circumstances of the fraud charges against the firm.For one, the SEC considered charging another individual – not just Fabrice Tourre. (He or she is not named.)
Two, the regulators had been investigating ABACUS since 2008, and for a number of other reasons detailed in the timing outlined below, the investigation determined that the charges of suspicious timing were wrong.
The investigation found that the timing was not coordinated with the announcement of Allen R Stanford’s fraud or the push for more financial regulation.
Below is the succession of events that led to the announcement of Goldman Sachs SEC fraud case getting pushed back months – because the SEC thought about charging another individual, and because they got testimony from someone inside Goldman Sachs.
Download the full 86-page investigation details by clicking here.
On August 25, 2008, the Headquarters Division of Enforcement staff opened an investigation into potential misrepresentations by Goldman in connection with the structuring and marketing of a collateralized debt obligation known as ABACUS 2007-ACI.
The SEC was supposed to charge Goldman Sachs on December 17, 2009, but decided that they should hear a testimony from a Goldman officer first – so the matter was pushed to months later.
A testimony from a Goldman officer was taken on January 4th, 2010. The officer’s name is not revealed.
On January 24, 2010, Chairman Schapiro wrote she was interested in “get[ting] the GS case out [to the public].”
On January 26, 2010, members of the Enforcement staff met with Commissioner Troy Paredes to discuss the matter.
On January 27, 2010, the day before the Commission meeting in which the Goldman recommendation was supposed to be heard, it was pulled from the Commission Calendar because (1) Commissioners were deciding whether or not to charge an additional individual; and (2) Enforcement staff wanted to
obtain more evidence from Abacus purchasers to strengthen the SEC’s case against Goldman.
On April 1, 2010, the Enforcement staff submitted paperwork recommending that the Commission file a civil action against Goldman and Tourre.
On April 8, in an e-mail circulating a draft complaint against Goldman, Enforcement wrote that they planned to send the Goldman complaint to New York to be filed “either the afternoon of Wednesday April 14 or morning of Thursday April 15.”
The Commission approved the filing ofthe Goldman action on Wednesday afternoon, April 14, 2010.
But then they realised that the NYAG was going to announce they had won a $7 million settlement with Quadrangle on the same day. Chairman Schapiro said, “Let’s make sure we don’t announce Goldman same day” because the Quadrangle case was a really important case for the NYAG and the SEC as well.
The SEC’s Office of Public Affairs did not want the SEC to announce two significant cases on the same day because the press would be diluted.
Then the NYAG announcement was pushed to April 15th, and the Goldman announcement was scheduled for April 16, when it was in fact announced to the public.
So, according to the investigation, there was no timing conspiracy. It found that the timing was not coordinated with the announcement of Allen R Stanford’s fraud or the push for more financial regulation.
What’s more interesting than that, in our opinion, are the details about the Goldman employee testifying and the SEC almost charging another individual. Of course, we don’t know who they are at this time.