SEC’s fraud case against Goldman generates shareholder suits
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Shareholders are slamming Goldman Sachs with lawsuits in the wake of the government’s decision to sue the company, alleging fraud.
In a filing with the Securities and Exchange Commission, the company detailed seven legal actions that shareholders have taken against the firm since April 16, when the SEC sued Goldman, alleging that it defrauded investors who bought a complex security from the company.
A few of the lawsuits came from owners of Goldman stock who say that their shares lost money because the company did not disclose that the SEC was pursuing action against the firm -- a standard complaint in shareholder suits. Goldman had discussions with the SEC before the lawsuit was filed but did not disclose that in its earlier financial filings, as is common.
“Due to its statements by its top executives denying any wrongdoing during the subprime crisis, the public and Goldman’s shareholders were shocked that the SEC filed an action,” said one of the suits, filed by James Clem, who is identified as a resident of California.
Other suits pile the new problems with the SEC on top of previous complaints against the company. A union pension fund filed an amended complaint to an earlier lawsuit complaining about the structure and size of Goldman’s executive bonuses, alleging now that those bonuses led to unethical behavior at the company.
“The pursuit of huge profits has given rise to an expansion of Goldman’s trading business that is a ‘moral bankruptcy,’ fraught with conflicts of interest and the systemic breaking of ethical lines,” the complaint, filed in Delaware court, says.
Goldman says in its SEC filing that it expects to face more, similar lawsuits. The company has said the SEC’s allegations are unfounded.
Until now, executives at the elite investment bank have largely avoided responding to public anger against the firm, but after an antagonistic Senate hearing last week, the company’s chief executive, Lloyd Blankfein, made a number of television appearances to defend his firm.
In an interview on the ‘Charlie Rose’ show, Blankfein acknowledged that the company had made a mistake in not dealing with the public earlier.
“Now you see that we have a lot of work to do explaining to people what it is that we do,’ Blankfein said. ‘And we’re starting from a hole.’
-- Nathaniel Popper