Judge Rakoff Mocks Goldman, Arbitration
NEW YORK (
) --- Judge Jed Rakoff, who has emerged in the wake of the financial crisis as one of Wall Street's toughest critics, aimed his poison pen at
Goldman Sachs
(GS) - Get Report
and the arbitration system in an opinion issued Tuesday.
At issue was a roughly $21 million dispute between Goldman and creditors of Bayou Group LLC, a hedge fund client of Goldman's that fell apart in 2005 after proving to be a Ponzi scheme.
An arbitration panel ruled that Goldman owed the $21 million, which Bayou CEO Samuel Israel had transfered among different Goldman accounts, to Bayou's creditors. Goldman attempted to get a court to throw out the ruling, but U.S. District Court Judge Rakoff upheld it in a Nov. 8 decision.
Explaining his decision in Tuesday's opinion, Rakoff wrote that though "arbitration is touted as a quick and cheap alternative to litigation, experience suggests that it can be slow and expensive. But it does have these 'advantages'; unlike courts, arbitrators do not have to give reasons for their decisions, and their decisions are essentially unappealable."
Goldman, "having voluntarily chosen to avail itself of this wondrous alternative to the rule of reason, must suffer the consequences," Rakoff jibed.
Rakoff attracted widespread attention last year when he rejected a $33 million settlement between
Bank of America
(BAC) - Get Report
and the
Securities and Exchange Commission
after the SEC claimed Bank of America made false and misleading statements to its investors regarding its acquisition of Merrill Lynch. Rakoff later reluctantly approved a larger $150 million settlement, calling it "paltry."
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Written by Dan Freed in New York
.
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