It’s called out-of-court settlement.
Yes, that's how any company in US can do anything, legally - but - it should be backed by a huge amount of money.
Case in point - Goldman Sachs settlement with SEC. Few months back, Goldman Sachs made a settlement with American regulators for $550m following an investigation into its practices that led to misleading its clients.
The $550million paid to regulators is a pittance in front of the $3 billion increase in its market value seen soon after the settlement of lawsuit.
Goldman’s acknowledgement in the settlement papers:
"Goldman acknowledges that the marketing materials for the ABACUS 2007-AC1 transaction contained incomplete information. In particular, it was a mistake for the Goldman marketing materials to state that the reference portfolio was "selected by" ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure."
Why did SEC investigate only the Abacus product sold by Goldman? Most probably because the money-losing clients of Abacus included big names like Royal Bank of Scotland.
Who knows if lot of other clients lost (and are losing even now) a lot more money due to Goldman’s practices?
$300 million of the settlement money (i.e. more than half) goes to SEC. Giving the money to regulator in return for settling a lawsuit can be considered equivalent to bribery.
Lesson: A company can get its way through anything, as long as it has deep pockets.
Case in point - Goldman Sachs settlement with SEC. Few months back, Goldman Sachs made a settlement with American regulators for $550m following an investigation into its practices that led to misleading its clients.
The $550million paid to regulators is a pittance in front of the $3 billion increase in its market value seen soon after the settlement of lawsuit.
Goldman’s acknowledgement in the settlement papers:
"Goldman acknowledges that the marketing materials for the ABACUS 2007-AC1 transaction contained incomplete information. In particular, it was a mistake for the Goldman marketing materials to state that the reference portfolio was "selected by" ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure."
Why did SEC investigate only the Abacus product sold by Goldman? Most probably because the money-losing clients of Abacus included big names like Royal Bank of Scotland.
Who knows if lot of other clients lost (and are losing even now) a lot more money due to Goldman’s practices?
$300 million of the settlement money (i.e. more than half) goes to SEC. Giving the money to regulator in return for settling a lawsuit can be considered equivalent to bribery.
Lesson: A company can get its way through anything, as long as it has deep pockets.
1 comment:
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