Goldman Sachs - White Collar Crime

 The U.S. Securities and Exchange Commission filed a civil fraud suit against Goldman Sachs Group in April of this year. While in litigation, S.E.C. also referred the investigation to federal prosecutors for the Southern District of New York, which could potentially lead to additional issues for the investment company. S.E.C.'s main argument is that Goldman has been defrauding its investors in relation to a mortgage deal known as Abacus 2007-AC1. Allegedly, there are internal e-mail messages within the company wherein employees had vilified investments that they were selling to customers. Basically, the company created an investment vehcile that allowed certain investors to bet against the housing market crash by purchasing securities to counter the mortgage bonds they believed would fail. Goldman was selling these same investments to its customers. Its customers lost billions when the housing market crashed while the investors that bet against them profited. This type of situation is commonly known as white collar fraud. This instance of white collar crime is especially signficant since, at this point, it involves an entire company rather than select individuals. Prosecutors often find difficulty charging a whole company because it can potentially upset the economy. The alternative is identifying key players involved in the conspiracy to decrease the effect.

At this point, the company is only under a preliminary investigation and little is known about the effect this criminal inquiry will have on the firm. According to a recent post from USA Today, if Goldman Sachs chooses to admit wrongdoing to avoid criminal prosecution, then its reputation as a key investor could be lost. This places Goldman in a particularly uneasy situation since the future of the company could be at stake depending on the result of these investigations. The company has continued to deny any involvement or wrongdoing that has been alleged by S.E.C.; however, in civil cases, the plaintiff wins if a preponderance of evidence is shown in favor of the plaintiff. In short, if S.E.C. is able show the jury that there is a more than a 50% probability that Goldman Sachs was directly involved in the investment scandal, then they will likely win their suit. On the other hand, criminal law involves a higher burden of proof in which the prosecution must prove its case beyond a reasonable doubt. This is the reason that prosecutors wish to conduct an investigation prior to filing an indictment in order to collect as much evidence as possible in connection with the alleged crime.

If the company or selected executives associated with the company are indicted, then it will be important to hire a knowledgeable attorney that specializes in white collar crime. An experienced defense attorney will be able to discuss any issues within the case and the possible outcomes that may result.