The Wall Street Journal points to several more "irregularities" - plain language: fraud - that may haunt the once prestigious Wall Street Institution for times to come.
According to a WSJ exclusive,
A Goldman Sachs Group Inc. director tipped off a hedge-fund billionaire about a $5 billion investment in Goldman by Warren Buffett's Berkshire Hathaway Inc. before a public announcement of the deal at the height of the 2008 financial crisis, a person close to the situation says.
The revelation marks a significant turn in the government's case against Raj Rajaratnam, the hedge-fund titan at the center of the largest insider-trading case in a generation. Mr. Buffett's investment in Goldman in September 2008 was a watershed moment in the financial crisis. One of the world's savviest investors, Mr. Buffett helped allay fears about the instability of the financial system by backing America's leading investment bank.
The new disclosure stems from a government examination into whether the Goldman director, Rajat Gupta, gave inside information to Mr. Rajaratnam. In a court filing March 22, the government alleged that Mr. Rajaratnam or "co-conspirators" traded on non-public information about Goldman. In a filing last week, the government provided more details about the information it alleges Mr. Rajaratnam received, including advance notice about the Buffett transaction with Goldman.
That information came from Mr. Gupta, a person familiar with the matter says. Federal prosecutors notified Mr. Gupta in a letter that they had intercepted phone conversations between him and Mr. Rajaratnam. Mr. Gupta told Goldman last month he wouldn't seek re-election as a director...This is being considered the largest insider trading case in history. Buffett made a cool $750 million on the deal and has repeated he trusts into Goldman in recent days.
Goldman CEO Lloyd Blankfein will testify before the Senate Permanent Subcommittee on Investigations and the publication of emails where Tourre labeled his derivatives as "Frankenstein turning against his own inventor" will not make his stand any easier.
From the WSJ:
The SEC suit has stoked a broader debate about Goldman, which survived the financial crisis in relatively strong shape and announced this past week that it made $3.46 billion in the most recent quarter. That was Goldman's second-highest quarterly profit on record.
Goldman's critics say the firm let clients bet that the mortgage market would remain healthy even as Goldman itself anticipated trouble ahead and tried to profit from the market's decline. Goldman says it was merely trying to protect itself from losses and didn't have a crystal ball. It says it was serving clients that wanted to make the bets.
In a statement Saturday, Sen. Carl Levin, chairman of the subcommittee that will hear the Goldman testimony, said investment banks such as Goldman Sachs "were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis."Goldman's troubles don't come to an end here. The WSJ chases the hedge fund in disguise with a few more stories:
- The Wall Street firm’s approach to winning business is coming under fire from German officials, companies and banks in the wake of an SEC civil-fraud suit.
- Internal emails and other communications depict Goldman bankers tussling with analysts at S&P and Moody’s, which is not uncommon among raters and companies.
- Wall Street banks provided spotty disclosures about how mortgage securities were selected for deals like the one in the government’s civil fraud suit against Goldman Sachs, according to a review by The Wall Street Journal.
- The SEC case and earlier Gupta matter occupy Goldman directors but they’ve had no comment.
- Goldman Sachs was both an underwriter and an investor in Lloyds ’s vast refinancing deal late last year, highlighting the potential conflicts of interest at the heart of the investment bank’s business model.