U.S. Not Seeking Goldman Charges. The Wall Street Journal August 10, 2012 p. C1 by Reed Albergotti and Elizabeth Rappaport
[excerpted] After a yearlong investigation, the Justice Department said Thursday that it won't bring charges against Goldman Sachs Group Inc. or any of its employees for financial fraud related to the mortgage crisis.
In a statement, the Justice Department said 'the burden of proof' couldn't be met to prosecute Goldman criminally...
Majia here: The article explains that a civil fraud investigation was leveled by the SEC against failing to disclose to investors that hedge-fund Paulson & Co had helped select the underlying securities and was betting the securities would default (using credit default swaps).
Goldman settled the civil fraud suit by paying $550 million.
I wonder how lying to clients about the creditworthiness of the investment instruments cannot be fraud?
Goldman Sach’s Fabrice’s email to his girlfriend illustrates the blatant criminality at issue here.
Tourre referred to himself "fabulous Fab" and described creating "Frankenstein" products that were nothing more than "pure intellectual masturbation" sold to naive widows and orphans (cited in Clark, 2010a). Tourre masterminded Abacus, a synthetic CDO, sold to clients who were not informed that the mortgages making up the CDO were expected to default (Clark, 2010b).
The hedge-fund Paulson & Co had helped Goldman assemble the CDOs and had bet against them by purchasing credit default swaps [a type of insurance] from the Royal Bank of Scotland, which incurred a $840 million liability from backstopping the hedge funds deal (Goldfarb & Tse, 2010, p. A1).
Fraud is a criminal crime.
Conspiracy to commit widespread criminal fraud is even more significant a crime.
Furthermore, Goldman's created wealth from its deceptions through purchase of credit default swaps, which payed out holders in the event that an "insured" security defaulted.
The Royal Bank of Scotland and AIG were major sources of credit default swaps. I'll focus on AIG here because its payouts essentially robbed the American people.
Goldman purchased credit default swaps from AIG for securities it knew were based on fraudulent mortgages.
The US government effectively nationalized AIG when AIG could not afford to pay out on all the credit default swaps that were activated by the onslaught of housing foreclosures that began in 2007.
The government made good AIG's credit default swaps, EVEN KNOWING THAT THE SECURITIES THAT WERE INSURED HAD BEEN INFUSED WITH FRAUD.
So, basically, Goldman Sachs created securities backed by mortgages it knew were lousy. It then sold these securities to unwitting investors, pretending they were AAA (the ratings' companies such as Moody's are complicit here).
Knowing that the securities were bad, Goldman Sachs then purchased credit default swaps from AIG, the Royal Bank of Scotland, etc, essentially betting that the underlying mortgages would default. Thus, Goldman Sachs criminally failed to tell clients that the securities were based on fraudulent underlying assets and failed to tell clients that Goldman Sachs was betting the securities would default with credit default swaps.
Then Goldman Sachs reaped lots and lots of money from AIG payouts on the credit default swaps. That money was payed by the US Government.
In March 09 Reuters reported that Goldman Sachs and a variety of European banks were the “major beneficiaries of $93 billion in payments from AIG” John O'Callaghan and Lilla Zuill
The NYT reported that “Financial companies that received multibillion-dollar payments owed by A.I.G. include Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).” http://www.nytimes.com/2009/03/16/business/16rescue.html
In April 09 the Treasury chief watchdog probed whether AIG paid more than necessary to banks. http://www.bloomberg.com/apps/news?pid=20601103&sid=aINWOYTgy2zk
Dylan Ratigan on MSNBC provides the following data in order to support his case for "clawbacks" for the government from the investment banks (Goldman Sachs Rapes America http://www.msnbc.msn.com/id/31510813/#33344267 ). Goldman Sachs received the following from the US Government since October 2008:
$10 billion from TARP
$11 billion from Federal Reserve Bank
$30 billion from FDIC
$13 billion from AIG
$70 billion total received from US Government to Goldman.
Goldman used this money to purchase assets in the US at the bottom of the market.
More recently, "Critics: Goldman should give back $2.9 billion to taxpayers" Feb 15, 2011. McClatchy
"The financial crisis panel's final report late last month found that Goldman's $2.9 billion payout came on "proprietary" trades — investments in which the firm used its own money rather than the more typical deals completed on behalf of clients.
"The panel, inquiring into a McClatchy report last June, said that Goldman got $1.9 billion of the payoff after the taxpayer bailout of AIG began.
"Critics say that in the rush to save AIG and avert systemic collapse of the financial markets, regulators treated Goldman like everyone else. But Goldman was different....read more...
Matt Taibbi asked in 2011 why Wall Street isn't in jail. You can listen to his interview with Amy Goodman if you don't want to read the story at Rolling Stone
MAJIA HERE: So, Goldman rapes America and investors worldwide and not a single Goldman employee is going to be charged criminally.
HOWEVER, a former Goldman Sachs computer programmer, Sergey Aleynikov, who allegedly absconded with code for high frequency trading he had written, is now being charged AGAIN with two felonies by the Manhattan DA office after previously being charged by the US attorney's office for the same alleged crimes. The US attorney convictions that occurred two years ago were recently overturned by an appeals court. Sergey's lawyers are claiming this is double jeopardy.
Source: "Goldman Code Case Revived" Wall Street Journal (8/10/201) p. C3.
What it does illustrate is that the US government at federal and state levels will go to extreme levels to charge criminally individuals on the outs with Goldman Sachs but will do nothing to hold Goldman Sachs' current employees responsible for their criminal acts.
A SIMILAR SITUATION APPLIES TO JP MORGAN, AS NOTED BY ELLEN BROWN:
Senate won't touch Jamie Dimon By Ellen Brown http://atimes.com/atimes/Global_Economy/NF23Dj07.html
[Excerpted] When Jamie Dimon, chief executive of JPMorgan Chase Bank, appeared before the US Senate Banking Committee on June 13, he was wearing cufflinks bearing the presidential seal. "Was Dimon trying to send any particular message by wearing the presidential cufflinks?" asked CNBC editor John Carney. "Was he ... subtly hinting that he's really the guy in charge?"
The groveling of the senators was so obvious that Jon Stewart did a spoof news clip on it, featured in a Huffington Post piece titled "Jon Stewart Blasts Senate's Coddling Of JPMorgan Chase CEO Jamie Dimon"; Matt Taibbi wrote an op-ed called "Senators Grovel, Embarrass Themselves at Dimon Hearing". He said the whole thing was painful to watch.
"What is going on with this panel of senators?" asked Stewart. "They're sucking up to Jamie Dimon like they're on JPMorgan's payroll."
JPMorgan Chase is the biggest campaign donor to many of the members of the banking committee....
[read the entire article at the link above]
Ellen Brown is an attorney and president of the Public Banking Institute, PublicBankingInstitute.org. In Web of Debt, her latest of 12 books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people
ADDITIONAL SOURCE ON PROSECUTION OF GOLDMAN PROGRAMMER
Ex-Goldman Programmer Is Arrested Again By PETER LATTMAN http://dealbook.nytimes.com/2012/08/09/ex-goldman-programmer-is-arrested-again/?nl=todaysheadlines&emc=edit_th_20120810
[excerpted] The legal odyssey of a former Goldman Sachs programmer, Sergey Aleynikov, took a surprising turn on Thursday when the Manhattan district attorney charged him with state crimes.
Mr. Aleynikov was charged in state court less than six months after a federal appeals court overturned his conviction on federal criminal charges that he stole secret source code from Goldman’s computers.
While the case involved a relatively low-level ex-employee at a financial firm, the government has taken a particularly hard line. The district attorney, Cyrus R. Vance Jr., and Preet Bharara, the United States attorney in Manhattan, have made the prosecution of corporate espionage and high-tech theft a top priority.
“This code is so highly confidential that it is known in the industry as the firm’s ‘secret sauce,’ ” Mr. Vance said Thursday in a statement. “Employees who exploit their access to sensitive information should expect to face criminal prosecution in New York State.”
The district attorney charged Mr. Aleynikov with the unlawful use of secret scientific material and duplication of computer-related material, both felonies under New York State law. If convicted, he could serve one to four years in prison....
...It is unusual for federal and state prosecutors to bring criminal charges against a defendant connected to the same set of facts. The Fifth Amendment of the Constitution prohibits double jeopardy, or being tried twice for the same crime, but the “dual sovereignty doctrine” permits different jurisdictions — in this case, the United States and New York State — to pursue charges for the same conduct....
FOR SOURCES ABOUT GOLDMAN: Nadesan. The Bio-politics of Transactional Capitalism Available http://www.mediatropes.com/index.php/Mediatropes/article/view/15747