Goldman Sachs Fraud Information
Brief description of Goldman Sachs
The national brokerage firm Goldman Sachs was one of Wall Street’s most successful during the economic boom of the mid- to late-nineties, but has also been one of the many that has come under fire in the new millennium.
Why is Goldman Sachs accused of fraud?
While the total extent of fraudulent activities at Goldman Sachs is unclear, it appears that the company has played a part in a number of cases that reflect an overall climate of dishonesty. For example:
· Goldman Sachs was one of five Wall Street firms to settle a December suit alleging insufficient email records. The suit, headed by the Securities and Exchange Commission (SEC), resulted in two penalties for Goldman Sachs: it was fined $1.65 million to be split between the U.S. Treasury, the New York Stock Exchange (NYSE), and the National Association of Securities Dealers (NASD); and it will have to take measures to make sure that it complies with SEC record-keeping regulations in the future.
· Goldman Sachs is one of a dozen defendants in another securities suit that is expected to settle in mid-2003. This suit – also filed by the SEC, but headed by New York Attorney General Eliot Spitzer – alleges collaboration between the investment banking and research/advice branches of each firm. The firms are believed to have issued advice to investors to inflate stock prices, with the goal of luring the patronage of investment banking clients that stood to benefit from these inflations. Goldman Sachs will pay approximately $150 million of the $1.4 billion settlement, the second most among the twelve. Each firm also must agree to regulations designed to separate their research and investment banking arms.
· Some of these same investment firms, including Goldman Sachs, are currently being sued for fraudulent manipulation of initial public offerings (IPOs) of stocks. Investor suits, which also name as defendants the companies they invested in, allege that the investment firms arranged deals that inflated the stocks’ prices as soon as they hit the market. For example, Goldman is suspected of participating in the notorious broker practice of arranging deals with buyers in which they can buy a stock before it is offered to the public, but must agree to make a purchase at a higher price during the stock’s IPO stage. The demand for shares that results inflates their price for consumers. Goldman Sachs is also being sued by the companies themselves – Etoys, for example, is alleging that Goldman undervalued its IPO in 1999.
· Goldman Sachs is facing charges by investors that it defrauded them in other ways. One of the most prominent cases involves Touch America, the company formerly known as Montana Power. According to investors, they were left in the dark when Goldman Sachs pitched the idea for the energy provider to transform itself into a telecommunications company. The transformation left the company bankrupt, and the stock has plummeted. |
