Mish is also wondering, did GS screw up in responding to the SEC allegations?
Did the SEC Bait Goldman Sachs? Sam Antar, Criminal CFO of Crazy Eddie Makes the Case
Courtesy of Mish
Sam Antar, a convicted felon who "helped mastermind one of the largest securities frauds uncovered during the 1980s" as CFO of Crazy Eddy is asking the question: Did a Clever SEC Bait Goldman Sachs Into Compounding Its Legal Problems?
The Cover up is more Dangerous than the Underlying Crime
Back in the day, I learned that the most dangerous time for a criminal is the cover up of a crime and not the execution of a crime. Public statements made by Eddie Antar’s father and brothers in defending their actions were later successfully used against them in civil and criminal proceedings. In pursuing the Antar’s, Simpson learned that criminals make hasty decisions to defend their actions which later land them into deeper legal trouble.
Goldman Sachs Makes Huge Error in After Market Response to SEC Lawsuit
Rule 10b-5 prohibits public companies, their officers, and employees from making:
…any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person….
The SEC claims that Goldman Sachs and Fabrice Tourre violated Rule 10b-5 by failing to disclose material information about Paulson’s role in selecting certain underlying mortgage securities and that Paulson was betting against the viability of those securities by taking a short position against them.
The Goldman Sachs press release starts out by saying:
…We are disappointed that the SEC would bring this action related to a single transaction in the face of an extensive record which establishes that the accusations are unfounded in law and fact.
As I will describe below, at the very least, the SEC’s allegations are founded in law under Rule 10b-5, contrary to the company’s representation to investors in its press release. In addition, the press release misleads investors about the SEC complaint, too. Therefore, the Goldman Sachs press release may subject the company to additional Rule 10b-5 violations.
Goldman Sachs defended itself by claiming that the allegedly defrauded investors are "sophisticated" and was provided with "extensive information" about the underlying mortgage securities: ….
Sophisticated investors are defrauded all the time. Even if "sophisticated investors" are buried with "extensive information", the omission of one key piece of material information by itself, such as concealing Paulson’s role in selecting the underlying mortgage securities and that Paulson was also shorting those same securities, can give rise to a securities law violation.
As I detailed above, under Rule 10b-5, a public company cannot
…omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading….
Therefore, Goldman misled investors in its press release when it stated that,
…the accusations are unfounded in law….
The SEC’s allegations are clearly founded on Rule 10b-5…..
.… read Sam’s full article here.>>
About the author: Sam E. Antar
I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other family members mastermind one of the largest securities frauds uncovered during the 1980s. My responsibilities at Crazy Eddie included skimming, money laundering, insurance fraud…
That is certainly an interesting viewpoint from an admitted and convicted felon. If what he says is true, (there is a lot more in the article), the Goldman Sachs complicated their life greatly instead of saying "No Comment".
