Goldman Sachs Will Not Face Criminal Charges: Justice Department
Reuters
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Posted: 08/09/2012 7:13 pm Updated: 08/10/20
* Decision follows more than a year of investigation
* Senator Levin had asked for criminal investigation
By David Ingram and Aruna Viswanatha
WASHINGTON, Aug 9 (Reuters) - The U.S. Justice Department said it will not pursue criminal charges against Goldman Sachs Group Inc or its employees related to accusations that the firm bet against the same subprime mortgage securities it was selling to clients.
The decision not to prosecute Goldman, a firm held up by critics as a symbol of Wall Street greed during the 2007-2009 financial crisis, highlights the difficulty in prosecuting crisis-related cases.
Few expected the bank to face criminal charges, but in April 2011, U.S. Senator Carl Levin asked for a criminal investigation after the subcommittee he leads spent more than a year looking into Goldman.
The accusations were aired in a heated 2010 Congressional hearing in which Levin grilled Goldman Chief Executive Lloyd Blankfein for hours about whether it was morally correct for the firm to sell its clients products described internally as "crap".
"The department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time," the Justice Department said in a statement late on Thursday.
The DOJ does not typically make public statements when it concludes an investigation.
Neil Barofsky, a former watchdog for the U.S. government's financial system bailout in 2008, said the announcement was a stark reminder that no individual or institution had been held meaningfully accountable for their role in the financial crisis.
"Without such accountability, the unending parade of megabanks scandals will inevitably continue," said Barofsky, who has been an outspoken critic of the government's response to the financial crisis.
In a brief statement emailed to Reuters, a Goldman Sachs spokesman said: "We are pleased that this matter is behind us."
A Levin aide had no immediate comment.
In a related civil case, Goldman settled with the U.S. Securities and Exchange Commission for $550 million in July 2010, without admitting wrongdoing.
The SEC, in one of its premier financial crisis cases, said Goldman failed to tell investors the Paulson & Co hedge fund helped choose and bet against the subprime mortgage-backed securities underlying an investment product named Abacus.
The SEC is still pursuing a civil complaint against Fabrice Tourre, a Goldman vice president involved in the Abacus deal.
Separately on Thursday, Goldman said the SEC had dropped an investigation into the firm's role in selling a different $1.3 billion subprime mortgage-related deal arranged in 2006.
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