The Securities and Exchange Commission has announced that Goldman Sachs will pay $550 million to settle the SEC’s charges against the firm. According to Robert Khuzami, Director of the SEC’s Division of Enforcement, “Half a billion dollars is the largest penalty ever assessed against a financial services firm in the history of the SEC. This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing.”
In April, The SEC sued Goldman Sachs and one of its employees for civil fraud, alleging they defrauded investors in 2007, in selling a financial product tied to sub prime mortgages. While Goldman acknowledged that its marketing materials for the sub prime product contained incomplete information; Goldman agreed to settle the SEC’s charges without admitting or denying the allegations by consenting to the entry of a final judgment that enjoins them from violating the anti-fraud provisions of the Securities Act of 1933.
In its complaint, the SEC alleged that Goldman misstated and omitted key facts regarding a synthetic collateralized debt obligation it marketed. In particular, the SEC alleged that Goldman failed to disclose the role that hedge fund, Paulson & Co. Inc., played in interests that were adverse to CDO investors. Of the $550 million to be paid by Goldman in the settlement, $250 million would be returned to harmed investors through a Fair Fund distribution and $300 million would be paid to the U.S. Treasury.
In January of this year, Bill George, former Chairman & CEO of Medtronic’s, Professor of Management Practice at Harvard Business School and author of True North, joined us on the McCuistion program. Dennis asked Bill George, “There are people watching this program who will ask, how is it that you can be so focused on character and values and yet be on the board of Goldman Sachs?”
Bill George’s answer, “Here’s a firm that for 140 years focused on their clients. They paid their people well. They paid for performance… not stars. They were the first execs on Wall Street that didn’t take bonuses. And when they saw the problem with sub prime mortgages, they got out 18 months ahead of everyone else.” Tune in for more of the story…and the values of true leadership from Bill George’s perspective.
Click here for full episode on Character and Leadership.
Additional links about the settlement:
- Analysts Cheer Goldman’s Settlement
- Weighing the Trade Offs in the Goldman Settlement
- Russia Stocks Advance on $76 Oil, Goldman Sachs U.S. Settlement
As always, thank you for watching as we talk about things that matter… with people who care.
Niki N. McCuistion