NEW YORK (
may want to settle its case with the
Securities and Exchange Commission
, but a top securities law professor doubts a settlement will be reached in the near term.
The New York Post
that the bank "may soon settle" its case with the SEC, citing unnamed sources. A Goldman spokesman declined to comment when asked by
if Goldman is pursuing a settlement, and an SEC spokesman declined to comment on whether the SEC is open to one.
The SEC charged Goldman with fraud on April 16, shocking the investing world and wreaking havoc in the markets. The SEC argues Goldman misled investors about complex securities it sold, failing to disclose that hedge fund
, which was betting against the securities, played a role in creating them. Goldman denies the charges. Since the civil charges were announced, Goldman shares are down more than 13%, though at $160.24 as of Thursday's close they were well off their low of $150.12
Richard Bove, analyst at Rochdale Securities, also says he believes settlement talks are under way, though he concedes his sources are neither at Goldman nor the SEC.
"What I'm hearing is there is a desire on the part of both parties to settle," Bove says. "From the standpoint of the SEC, it would appear they're beginning to understand that they don't have a case, but they can't walk away because it would be embarrassing, and they've got to get a pound of flesh.
"From the standpoint of Goldman what I understand is they would be very happy to see this thing go away and they would be willing to pay a price to see it go away, but they felt that to this point they were never given the opportunity to do that."
Columbia University securities law professor John Coffee is incredulous that the SEC would let it leak that it believes its case is weak.
"I can't imagine that the SEC is suicidal enough to make such a statement or to hint it," Coffee says. "It offends any litigator's sense of what you can do. The thing litigators say is 'see you in court.' They do not ever make concessions like that."
Coffee believes the two sides may eventually reach a settlement, but he thinks it is too early, and the more interesting question for the short term is whether Goldman will move to dismiss the case.
"My guess is that Goldman Sachs will think twice about whether they'll even make a motion to dismiss because losing a motion to dismiss will get a headline or two," Coffee says.
If Goldman does eventually settle, Coffee believes it will cost at least $100 million, and Goldman will have to agree through something called a consent injunction to provide far more detailed and extensive disclosures regarding financial products they sell in the future. While the SEC argues such disclosures are already required, the consent injunction means that if Goldman violated that law in the future, it would be subject to criminal liability. The current case is merely a civil one.
Written by Dan Freed in New York
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