Goldman Sachs seeks to settle securities fraud suit with US regulator

Goldman Sachs, the global investment banking and securities firm is trying to wriggle out of the mortgage securities fraud suit bought on by the US regulator by attempting to broker a settlement on a lesser offence with the US Securities and Exchange Commission (SEC).

Wall Street's most profitable bank, which had denied vigorously of any wrong doing in the securities fraud case, is in talks with the SEC to reach a settlement on a lesser offence and agreeing to a fine of hundreds of millions of dollars, said the Financial Times, citing people familiar with the bank's negotiating position.

More than a year after Wall Street banks triggered the world's biggest financial crisis, the US government finally cracked the whip by suing Goldman Sachs on 16 April 2010, a 139-year old institution for mortgage securities fraud. (See: Goldman Sachs sued by US regulator for securities fraud)

In the 22-page civil suit filed by the SEC in a New York Court against Goldman Sachs and one of its employees Fabrice Tourre, the SEC had accused the firm of not disclosing vital information about a synthetic collateralised debt obligation (CDO) called 'Abacus' to investors, and in particular the role played by one of the world's largest hedge funds, Paulson & Co, in the portfolio selection process, where it had taken a short position against the CDO.

It is not clear whether the SEC would agree to settle such a high profile case, as similar cases are likely to be bought on by the SEC on other Wall Street operators, which are blamed for triggering the global financial crisis.

The FT said that according to people involved in the discussions say that even if the SEC agrees to consider a lesser charge, Goldman would neither admit nor deny wrongdoing – a common practice among companies settling with the SEC.