Goldman Settles

The SEC announced a settlement with Goldman Sachs in the case arising out of the Abacus deal.  The Company will pay $15 million in disgorgement and a civil penalty of $535 million.  The firm has also agreed to certain internal reforms that contemplate review of written materials by inside and outside counsel and review of deals by a specified committee within the firm.  Goldman's consent is here.  The proposed judgment is here. 

Goldman consented (without admitting or denying) to a violation of Section 17(a) of the 1933 Act.  Because Section 17(a) can be violated through either negligent or fraudulent disclosure, Goldman did not consent to a finding of fraud.  Indeed, the language of the settlement was carefully crafted to have Goldman admit only that it used marketing materials that contained "incomplete information." As the firm stated:

• Goldman acknowledges that the marketing materials for the ABACUS 2007-AC1 transaction contained incomplete information. In particular, 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 and that Paulson's economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure.

The SEC, therefore, received a penalty/disgorgement amount that meant business while Goldman avoided admitting to fraud.

The case is not finished.  The action against Fabrice Tourre continues.  The settlement today did not include him.