Goldman Sachs has apparently entered settlement talks with the Securities and Exchange Commission (SEC) to settle civil fraud charges the agency levied against the investment bank last month. According to a Wall Street Journal report, the talks didn’t include any specific settlement terms, such as the amount of a fine or agreements Goldman could make with the agency. What’s more, the two side remain far apart.
In April, the SEC filed a civil suit against Goldman Sachs, as well as Vice President Fabrice Tourre, over a financial product called Abacus 2007-AC1. As we reported previously, Abacus was a collateralized debt obligation linked to the performance of subprime mortgages that the SEC says was designed to lose money. Investors in Abacus were never informed that a hedge-fund firm helped to pick some of its underlying mortgage securities and was betting on the financial instrument’s decline, the SEC said.
In addition, the Justice Department is also said to be looking into Goldman Sach’s mortgage deals, raising fears of a potential criminal charges.
According to The Wall Street Journal, since the SEC charges were filed, Goldman Sach’s shares have fallen 23 percent, wiping out $20 billion in shareholder value.
While the investment bank initially took a combative stance with the SEC, the Journal said Goldman Sach’s lawyers have concluded that the company needs to make a serious effort to resolve the SEC lawsuit. Unnamed sources reported to the Journal that the firm’s Chief Financial Officer David Viniar and Vice Chairman J. Michael Evans told some large shareholders that Goldman “would be happy to settle today.”
News of the SEC-Goldman Sach’s talks came the same day as the firm held its annual shareholder meeting in Manhattan. According to the Journal, its Chief Operating Officer, Gary Cohn, declined to comment about the reported talks during the meeting, but told reporters that “something has to happen in the case.”