Sat, Sep 5, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

After Goldman Sachs’ settlement: RBS to seek more, Tourre denies fraud charges

Tuesday, July 20, 2010
Opalesque Industry Update – The U.S. Securities and Exchange Commission (SEC) gained a victory with the record $550m fine it slapped on financial giant Goldman Sachs Group Inc., to settle a civil lawsuit that claimed the bank had misled investors about a controversial subprime mortgage product it sold in 2007.

The SEC was not unanimous in its decision over the landmark civil case against the bank, the Wall Street Journal reported.

But while the amount may be the largest in banking history, the conventional wisdom in Wall Street is that the settlement was a victory for Goldman because the penalty was not large enough for a firm its size. The agreement will also benefit Goldman since the U.S. regulator did not require the bank to admit to any wrongdoing.

Early estimates by analysts had placed the cost of settlement to be over $1bn, according to Bloomberg. With the civil claims behind it, Goldman Sachs has ended a three month-old public relations nightmare.

News of the settlement added $3bn to Goldman’s market value on Thursday, and it further climbed after the close of the New York Trading, the report added.

"They pay $550m and they get an $800m pop in their stock price—they got off easy,'' Kevin Caron, a market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey told CNBC.

The suit, filed on April 16, accused Goldman Sachs of misleading its investors into buying collateralized debt obligations (CDOs) that one of its clients, hedge fund billionaire John Paulson, was betting on to fail. However, the criminal case against one of Goldman’s executives, Fabrice Tourre, who is central to the case, will not be dropped.

On Monday (July 19), Fabrice Tourre denied the charges being hurled against him, saying he had relied on Goldman’s legal and compliance department. He dismissed allegations he had misled or omitted facts in relation to the sale of the Abacus 2007-AC1 product.

RBS to seek more from Goldman
German bank IKB Deutsche Industriebank will get $150m out of the $550m Goldman agreed to pay. The money represents the whole amount IKB lost in the CDOs, CNBC said.

UK-owned Royal Bank of Scotland (RBS) will be receiving $100m from the settlement deal. However, RBS said on Friday it would “carefully consider all of its options” and try to squeeze out more money from Goldman.

RBS lost $841m on the subprime product known as Abacus 2007-ACI. Goldman’s settlement with the SEC allows RBS to file future civil suits and ask for $741m more to recover all its losses from the transaction.

Goldman will report its second-quarter results today. Some analysts have predicted the bank would perform 35% down because of the controversy.
-Precy Dumlao

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: New Detroit-based CTA seeks to take advantage of coming volatility[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: An emerging manager has just set up his one-man shop in the city of Detroit. Synchronicity Futures,

  2. Opalesque Exclusive: When the SEC calls, fund managers need to get out of their own way[more]

    Bailey McCann, Opalesque New York: New pressure is hitting alternative investment funds from all angles. So far this month both hedge fund and private equity players have seen enforcement actions, and subsequent fines over fees, disclosures, and misleading statements. Citi one of the biggest

  3. Fortress hedge fund manager David Dredge says markets trouble on the way[more]

    From AFR.com: David Dredge of global hedge fund Fortress has built a career studying, predicting and protecting against the world's major financial crises. The recent convulsions in global sharemarkets are "just the beginning" of a painful adjustment as money drains from the emerging market economie

  4. North America - Puerto Rico agency plans talks with hedge fund creditors[more]

    From WSJ.com: Puerto Rico’s Government Development Bank is planning to begin confidential debt-restructuring talks with hedge funds that own its bonds as early as next week, said a person familiar with the matter. The parties are set to discuss a plan under which the investors would lend additional

  5. Launches - BlackRock’s McKenna starts hedge fund with $270m, Ex-BlueBay fund managers Phillips, Fayman to launch hedge fund in 2016, Dallas lawyer, Wall Street-savvy doctor team up to form biotech-focused hedge fund[more]

    BlackRock’s McKenna starts hedge fund with $270m From Bloomberg.com: BlackRock Inc. has started an event-driven hedge fund one year after hiring Harvard Management Co.’s Mark McKenna to run the strategy. Global Event Partners, which seeks to profit from corporate events such as takeovers

 

banner