Goldman may try to settle with SEC

Settlement talks may begin soon, a news report says. Goldman insists, however, it has done nothing wrong.

By Charley Blaine May 4, 2010 3:03PM

Updated: 7:25 p.m. ET.


For most of Tuesday, Goldman Sachs (GS) was one of the few financial stocks in positive territory.


It was up as much as 1.9% to $152.35 after a report suggested that the investment bank and the Securities and Exchange Commission are about to start settlement talks about the SEC's fraud charges.

But the shares slipped back to 149.45, down 5 cents on the day.


But that was a whole lot better than the Dow Jones industrials ($INDU), which closed down 225 points to 10,927. Or the S&P 500 Financial Sector exchange-traded fund (XLF), which slid 2.7% to $16.02.


The SEC had charged Goldman with fraud, saying it hadn't disclosed enough information to investors buying an issue of mortgage securities. The agency said the offering documents hadn't disclosed that the issue was put together at the behest of a big hedge fund operator who wanted to short the mortgage market.

Fox Business reporter Charles Gasparino said sources said that attorneys for the Goldman Sachs plan to initiate settlement talks soon after the company releases its response to the SEC's charges.

According to Gasparino's report, Goldman officials are leaning toward a sweeping defense of the company's actions, rather than a motion to dismiss the civil charges filed by the SEC two weeks ago that alleged the firm failed to disclose material information to investors who bought the mortgage-related bonds back in 2007, just as the housing crisis was to kick into full gear.

At issue: whether Goldman should have told investors that short-seller John Paulson was largely responsible for putting together the portfolio of debt, while he was betting against it.

Goldman continues to believe strongly that the SEC's case is without merit, Gasparino said, but the company also does not want to go to battle with regulators. "We can't be going to war with the SEC," said one senior executive.

Shares of Goldman are down 11.5% this year and have fluctuated wildly since the disclosure of the charges and, most recently, news that the Justice Department has launched a criminal probe into the matter.

On Monday, Goldman's stock surged after legendary investor Warren Buffett, who owns a stake in the company, defended the company's actions and supported its embattled CEO, Lloyd Blankfein.

In addition, Gasparino said the criminal probe is the result of an SEC referral of its case and thus may be more routine than anything else.

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