AFP: SEC may have destroyed crucial probe data: senator

A US senator said Wednesday that the Securities and Exchange Commission may have destroyed thousands of documents related to probes into possible violations by major banks and hedge funds.

Senior Republican Senator Chuck Grassley said that “an agency whistle-blower” sent him a letter that described the SEC’s allegedly unlawful destruction of records related to more than 9,000 informal investigations.

The documents included cases arising from the 2008-2009 financial crisis, including Goldman Sachs, AIG, and the Bernard Madoff pyramid fund, according to the whistle-blower, Grassley said.

The whistle-blower, 13-year SEC lawyer Darcy Flynn, said the destroyed records related to “matters under inquiry” or MUIs — probes that precede the launch of formal investigations.

“From what I’ve seen, it looks as if the SEC might have sanctioned some level of case-related document destruction,” Grassley said in a statement.

“It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence.”

via AFP: SEC may have destroyed crucial probe data: senator.

Is Goldman the Next to Get Into FCPA Trouble? – Law Blog – WSJ

It’s a you-got-your-chocolate-in-my-peanut-butter moment.

Two of the hottest things going, stepped-up regulation of banks and enforcement of foreign bribery laws, are on a possible collision course, according to this WSJ story out Thursday.

That’s right, U.S. securities regulators are examining whether Goldman Sachs and other financial firms might have violated bribery laws in dealings with Libya’s sovereign-wealth fund, according to people familiar with the matter. SEC lawyers are reviewing documents that detail the firms’ relationships with the Libyan Investment Authority controlled by Col. Moammar Gadhafi, these people said.

Among other things, SEC officials are interested in a $50 million fee Goldman initially agreed to pay the Libyan sovereign-wealth fund as part of a proposal by the bank to help the fund recoup losses, according to these people.

The Libyan Investment Authority would have passed on the $50 million payment to an outside adviser, The Wall Street Journal reported last month. But that outside adviser, Palladyne International Asset Management, was run at the time by the son-in-law of the head of Libya’s state-owned oil company.

The $50 million payment was never made, because discussions between Goldman and the sovereign-wealth fund stalled before violence erupted in Libya in February, according to people familiar with the matter.

But the fact the payment wasn’t made doesn’t necessarily exempt it from trouble under the Foreign Corrupt Practices Act.

via Is Goldman the Next to Get Into FCPA Trouble? – Law Blog – WSJ.

Subpoena Lands on Doorstep of Goldman Sachs – Law Blog – WSJ

The Manhattan District Attorney’s Office has subpoenaed Goldman seeking information on its business dealings, a move prompted by a recent U.S. Senate report that was highly critical of the bank.

Here’s a WSJ report on the development, and one from AP. The reports do not offer details about the precise scope of the subpoena.

In its 639-page report, the Senate Permanent Subcommittee on Investigations in April accused Goldman of betting against the housing market and failing to adequately warn investors about the dangers of risky mortgage securities it promoted.

Goldman has said repeatedly that it simultaneously took “long” and “short” positions on mortgages as part of its normal business, WSJ reported in this earlier piece about the Senate report. Goldman usually had a bullish overall bet during the housing crisis and thus suffered losses when the real-estate bubble burst, according to WSJ.

via Subpoena Lands on Doorstep of Goldman Sachs – Law Blog – WSJ.

Lessons From NY Times Investigative Journalism: Destroy Your Old Computers – Daniel Indiviglio – Business – The Atlantic

But perhaps the most interesting part of the story is the one the business journalists are buzzing about: where the Times got a fair portion of its information in this investigative article. It came from a laptop in the possession of artist-film maker Nancy Cohen. Here’s where she got it:

The friend told her he had happened upon the laptop discarded in a garbage area in a downtown apartment building. E-mail messages for Mr. Tourre continued streaming into the device, but Ms. Cohen said she had ignored them until she heard Mr. Tourre’s name in news reports about the S.E.C. case. She then provided the material to The Times.

This is amazing. Felix Salmon at Reuters speculates that the Times, Cohen, or her friend may have hacked this laptop to get those e-mails. Anyone reading this post has some experience with computers and e-mail addresses. Most computers are password protected, but all e-mail addresses are password protected. Passwords are also often changed, sometimes on a mandatory, set schedule. It’s theoretically possible that this laptop was not password protected, that the password was stored in a browser or file, and that it remained unchanged during this time. If all those stars aligned, then the Times has incredible luck.

There are lessons here too — even for those of us who do not work for Goldman Sachs. First, secure your computer. While a good hacker might be able to breach any system, your average reporter or artist cannot. Even if you don’t find yourself the target of an SEC investigation, you probably don’t want your e-mails or other personal information snooped through by someone who stumbles upon your old computer.

Of course, there’s another way to avoid this: destroy your old hard drives. Whenever I throw away an old computer, I take pull out the hard drive and take a hammer to it — even if there’s nothing particularly exciting to find, other than some great philosophy papers on Aristotle from college. While some truly gifted computer forensics expert might be able to reconstruct a demolished hard drive or obtain glimmers of information from its parts, the chances of that occurring are quite slim.

via Lessons From NY Times Investigative Journalism: Destroy Your Old Computers – Daniel Indiviglio – Business – The Atlantic.

Will the SEC Blow the Whistle on the Goldman/Facebook Deal? – Law Blog – WSJ

So far, it’s the biggest business story of 2011: Goldman Sachs’s plan to invest $450 million in Facebook and offer clients up to $1.5 billion in Facebook equity.

But from a legal perspective, is it entirely above board?

According to stories in the WSJ and Bloomberg, the answer might not be clear-cut enough to elude the notice of the Securities & Exchange Commission.

Already, according to the stories, the SEC is scrutinizing the market for trading shares of closely held companies including Facebook.

Potentially at issue in regard to Facebook: whether Facebook is deliberately circumventing SEC disclosure rules.

As Bloomberg explains, the SEC requires any company with more than 499 investors to disclose certain financial information. But some private companies seek to avoid crossing the disclosure threshold by funneling investors’ funds through a single entity, such as a private equity firm or hedge fund.

via Will the SEC Blow the Whistle on the Goldman/Facebook Deal? – Law Blog – WSJ.

Tablet Tipping Point Means The End Of Microsoft (As We Know It) — InformationWeek

I’m revising my thesis based on research published Sunday by Goldman Sachs that is, in a word, stunning. Goldman’s analysts dropped a pair of notes in which they predict the PC industry will grow next year not by the mid-teens number most in the industry expect, but by just 8%.

At the same time, Goldman thinks tablet shipments will increase by more than 500%! And the real game changer, according to the investment bank’s world-class equity research team, is that all those tablet shipments will cannibalize PC sales at a rate of 35% in the next year alone. In other words, one in three PC sales will be lost to tablets in 2011, if Goldman Sachs is right.

Unless something changes real soon, almost none of those tablets will be running Windows software. “A tablet response is still not forthcoming,” Goldman’s Sarah Friar said of Microsoft, in her note. How much revenue is at risk? If tablets knock down Windows sales by a third, that adds up to about a $5.5 billion haircut to Microsoft’s top line. But it’s more complicated than that.

With so much platform competition, Microsoft will be forced to lower the licensing fees it charges to OEMs. “With a multitude of operating environments popping up on tablets, Microsoft may not be able to capture a dominant share in this segment of the market. For PC vendors, this may mean that they finally have a powerful negotiating tool for OS pricing,” says Goldman Sachs hardware analyst Bill Shope, in his note.

via Tablet Tipping Point Means The End Of Microsoft (As We Know It) — InformationWeek.

Just in Time for the Holidays: The Largest Insider-Trading Case Ever? – Law Blog – WSJ

The Wall Street Journal broke the news over the weekend that federal authorities are about to bring a huge insider-trading case against a host of financial players. According to Saturday’s story, the case could “ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation.”

The criminal and civil probes are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, people close to the investigation say. Some charges could be brought before year-end.

One focus of the criminal investigation is whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide “expert network” services to hedge funds and mutual funds.

In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.

“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” the email said. “(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.”

via Just in Time for the Holidays: The Largest Insider-Trading Case Ever? – Law Blog – WSJ.

Goldman’s Golden Rules: SEC and FSA Set New Global Standards for Compliance

(Westlaw Business) Goldman Sachs and its regulators around the world have set a new gold standard for compliance and disclosure in the handling of deals, disclosures and enforcement. As broad as that sounds, the impact of recent rulings on both sides of the Atlantic is even broader, as Goldman is being told two things. First, act globally from a regulatory perspective, not just a deal-making perspective. Second, re-engineer business conduct from deal origination through internal communications, along with governance and compliance.

The global elements of the outcome are among the many interesting elements of the rulings. The rulings appeared in near-sequence from both the U.S. Securities Exchange Commission (SEC) and the UK Financial Services Authority (FSA). Taken together, these rulings raise questions about the cross-border conduct of global banks, regulatory risk management, and the essential role that the “C-suite” has to play throughout.

via Goldman’s Golden Rules: SEC and FSA Set New Global Standards for Compliance.

Goldman Sachs hit by lurid allegations of sex discrimination | Business | The Guardian

The Wall Street bank Goldman Sachs has been hit with a sexual discrimination lawsuit from three former female employees who claim the firm has a testosterone-driven culture of press-up contests on the trading floor, male-dominated golf outings and scantily clad escorts at an office Christmas party.

Filed in New York’s federal court today, the suit alleges that Goldman’s decentralised structure gives broad discretion to managers in assigning pay, responsibility and advancement to employees.

“Goldman Sachs gives its managers, the overwhelming majority of whom are men, unchecked discretion to assign responsibilities, accounts and projects to their subordinates,” says the complaint.

“The end result is that managers, whether based on conscious or unexamined bias, most often assign the most lucrative and promising opportunities, and ‘seats’, to men.”

The plaintiffs are Cristina Chen-Oster, a former vice-president in bond sales who worked for Goldman for eight years until 2005; Lisa Parisi, who was in asset management from 2001 to 2008; and Shanna Orlich, an analyst from 2007 to 2008 who alleges she was denied opportunities to become a trader.

Their law firm, an aggressive specialist in class actions, which is also suing BP over its oil spill and Toyota over sticking accelerators, has set up a Goldman-targeted website and is urging other former employees to come forward.

The suit points out that the representation of women gets worse higher up the ranks at Goldman – 29% of its vice-presidents in 2009 were female but women made up only 17% of managing directors, 14% of partners and just four members of a 30-person top management committee.

via Goldman Sachs hit by lurid allegations of sex discrimination | Business | The Guardian.

Goldman Said to Be Fined Less Than $30.9 Million by U.K. Over Abacus Probe – Bloomberg

Goldman Sachs Group Inc., which agreed to pay $550 million in July to settle a U.S. regulator’s fraud lawsuit, will pay a separate fine to the U.K.’s Financial Services Authority, said a person briefed on the FSA’s decision.

The U.K. regulator found that Goldman Sachs failed to notify it about the U.S. Securities and Exchange Commission’s investigation of the New York-based firm’s Abacus transaction and of employee Fabrice Tourre’s role in it, according to the person, who spoke anonymously because the penalty hasn’t yet been made public.

The fine is less than 20 million pounds ($30.9 million) and may be announced as soon as today, the person said. FSA spokeswoman Cerris Tavinor declined to comment, as did Goldman Sachs spokesman Ed Canaday. The Financial Times reported the FSA’s plan yesterday.

via Goldman Said to Be Fined Less Than $30.9 Million by U.K. Over Abacus Probe – Bloomberg.