Yesterday I wrote this diary about the CEO of Goldman Sachs, Lloyd Blankfein, hiring of a top criminal defense lawyer at Steptoe & Johnson LLP. The source for that information was an unnamed government official. Well, today we have a named plaintiff's attorney, Jake Zamansky, a former US attorney who successfully sued Wall Street investment bankers after the collapse of the dot.com bubble, give his take on Goldman Sach's current legal situation:
Goldman Sachs, the embattled investment bank, will face an array of legal claims focusing on its conduct during the financial crisis, one of Wall Street's most feared lawyers warned last night.
The prediction of an escalation in cases is being made by Jake Zamansky, the US attorney nicknamed "Jaws" who spearheaded the successful pursuit of the investment banks after the dotcom crash ...
"I consider this to be a very significant event. For Lloyd Blankfein to be hiring a top criminal lawyer indicates that there may be allegations of wrongdoing forthcoming from the Department of Justice [DoJ]," Zamansky said. "Investors are asking why there have been no criminal cases against Goldman Sachs or any investment bank arising from the financial crisis. This may be a sign of more cases to come. It may be the beginning of a series of cases against Wall Street firms".
Back in 2001, Zamansky, a former US Attorney and FTC lawyer, sued Merrill Lynch and its top rated technology analyst Henry Blodgett for falsely misrepresenting the value of dotcom stocks Merrill Lynch was touting. The settlement of that case led to then NY Attorney General Eliot Spitzer and the SEC to bring an action against against a number of Wall Street firms which ultimately resulted in a global settlement of all claims in 2002 for defrauding thier customers by providing unrealistic assessments of the values of the dotcom stocks being promoted and sold. The total fine imposed was $1.45 Billion, and the firms who were involved included, among others, Goldman Sachs.
$1.4 Billion Global Settlement Includes Penalties and Funds for Investors
Securities and Exchange Commission Chairman Harvey L. Pitt, New York Attorney General Spitzer, North American Securities Administrators Association President Christine Bruenn, NASD Chairman and CEO Robert Glauber, New York Stock Exchange Chairman Dick Grasso, and state securities regulators announced an historic settlement with the nation's top investment firms to resolve issues of conflict of interest at brokerage firms.
The "global settlement" concludes a joint investigation begun in April by regulators into the undue influence of investment banking interests on securities research at brokerage firms. The settlement will bring about balanced reform in the industry and bolster confidence in the integrity of equity research.
So Zamansky is a credible person to be speaking on these matters, even if he is also an interested party as the lawyer for a a groups of investors suing Goldman Sachs over the collapse of the CDO derivatives bubble:
Zamansky is representing a group of un-named investors suing Goldman, although the case is unrelated to the bank's battles with the DoJ.
Indeed, Zamansky's group is hardly the only one looking to get their pound of flesh out of Goldman Sachs' and Lloyd Blankfein's respective hides. Others are currently suing Goldman, and more lawsuits are expected, whether private or governmental based legal actions, as Goldman Sach's admitted in filings with the SEC this month:
However, other moves to pursue the investment bank and its directors are under way, with court documents showing that Blankfein and his fellow directors have been named in a derivative court action filed in New York by an individual investor called Michael Brautigam. Counsel for the defendants, who also include Goldman non-executive and steel tycoon Lakshmi Mittal, have been asked by District Judge William H Pauley III to appear in court next month for a pre-trial conference. As this is a civil case, Weingarten will not be representing Blankfein. The derivative action formed part of a 12-page report detailing the current legal cases the bank is facing, which Goldman outlined in a regulatory filing this month.
The document goes on to admit: "The firm expects to be the subject of additional putative shareholder derivative actions, purported class actions, rescission and 'put back' claims and other litigation, additional investor and shareholder demands, and additional regulatory and other investigations and actions with respect to mortgage-related offerings, loan sales, CDOs [collateralized debt obligations] and servicing and foreclosure activities".
The shit is hitting the fan for GS, the most ruthless of the Banksters, whether the Obama Justice Department, and other state and local prosecutors, are going to jump in or not, though signs are that some officials may well be planning prosecutions. This is based on subpoenas for documents served on Goldman and Blankfein by the Manhattan DA, and from unnamed Federal Regulators -- according to the NY Times -- and Goldman Sachs and its executives no doubt anticipate further federal and state investigations in addition to the demands for disclosure of evidence that private lawsuits will generate.
In any event, Goldman Sachs and its CEO Lloyd Blankfein appear to be headed for a world of pain.
UPDATE: From Fox News, sources claim it's the Timberwolf deal that Federal prosecutors are most interested in with regards tom a possible lying to Congress charge:
Sources close to the matter add that the potential charges of lying to Congress may be buoyed by testimony given by Goldman Sachs on a deal dubbed "Timberwolf," (See EMac's Bottom Line, "Goldman Accused of Misleading Congress, Clients".)
In that deal, Goldman had taken a short position on about 36% of the $1 billion in assets underlying its securities, and initially made $333 million in revenues and interest from that investment, but ultimately lost a net $455 million when it could not sell all of the Timberwolf securities, according to FOX Business Network's earlier report.
Last April, Sen. Levin questioned Daniel Sparks, the Goldman executive who ran Goldman's mortgage business at the time, on whether Goldman was misleading clients into buying investments its executives knew were steadily dropping into junk territory.
During the hearing, Sen. Levin pointed out to Sparks an e-mail exchange between him and former Goldman executive Thomas Montag (now at Bank of America) on the Timberwolf deal.
"'Boy that Timberwolf was one sh-- deal,' Montag wrote in his 2007 email to Sparks. "How much of that sh-- deal did you sell?"
While Sparks was selling the deal as a positive investment to clients, according to emails the Senate received, Sparks was also emailing Goldman executives saying, "Game over," "bad news everywhere," and "the business is totally dead."
The Senate subcommittee report had also accused Goldman of conflicts of interest in other asset-backed securities deals. Specifically, the report said Goldman allegedly withheld material information from clients, notably in a collateralized debt obligation deal dubbed Hudson Mezzanine-2006-1.
In the case of this CDO, Goldman Sachs told investors its interests were "aligned" with theirs even though the firm held 100 percent of the short side, says the Senate report.
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Also, as to why Blankfein hired Weingarten as his criminal defense attorney, it appears that Weingarten and current Attorney General Eric Holder are long standing friends:
Weingarten is a friend of Holder’s, with whom he helped found the nonprofit See Forever Foundation, according to Weingarten’s biography on Steptoe & Johnson’s website.