After Goldman’s payout, will RBS make a claim?
Now Goldman Sachs has agreed to pay $550m to settle fraud allegations levelled by the Securities & Exchange Commission in the US the law suits are sure to follow.
That raises questions for RBS, which lost $800m or so of our money through its involvement in the dodgy mortgage backed security peddled by Goldman Sachs that has been the cause of the all the trouble.
As part of the settlement with the SEC, RBS will get $100m of the $550m – a mere fraction those losses. RBS says it is considering its options and one of those options would be to launch a legal claim. I would argue that it absolutely has to.
In settling the case Goldman has neither admitted nor denied fraud, which is standard in these situations, even if you do think that a fine of that quantum says an awful lot.
However, significantly it did say in its statement that: “We acknowledged that the marketing materials for the ABACUS 2007-ACI 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.”
Paulson, of course, was the hedge fund that advised on the bond’s portfolio then bet on its failure (although I should stress that no wrong doing has ever been alleged against it).
The admission by Goldman appears to be significant, because it would seem to me that Goldman is accepting that RBS got involved without being fully informed of the facts. That being the case, $100m seems like nowhere near enough to settle the matter.
Of course, talks could be going on about a rather bigger sum at this moment (RBS isn’t saying). But given what we now know about this whole shabby affair, you could very easily argue that RBS’s directors are under a fiduciary duty to us (as taxpayers) to pursue a claim.
Over to you Stephen Hester.Tagged in: fraud, goldman sachs, rbs, sec
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