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Source: Goldman CEO to Testify Before Senate

Thursday, 22 April 2010 08:10 AM EDT

Goldman Sachs is taking its fight against a government civil fraud case to Capitol Hill.

Goldman CEO Lloyd Blankfein will testify before a Senate panel Tuesday in what are expected to be his first public comments on the Securities and Exchange Commission's lawsuit charging that the bank defrauded two investors, according to a person familiar with the plans. He spoke on condition of anonymity because the appearance hasn't been publicly announced.

A 31-year-old Goldman employee at the center of the lawsuit, Fabrice Tourre, is also expected to be questioned at the hearing, according to media reports. Goldman Sachs Group Inc. spokesman Samuel Robinson declined to comment on the reports.

Blankfein will answer questions before the Senate's Permanent Subcommittee on Investigation, which is investigating the role of major banks in the subprime mortgage crisis, according to the person. Blankfein agreed to appear before the panel before the SEC sued the bank but is expected to take questions on the case. The panel declined to comment.

Goldman's willingness to answer questions in such a public forum suggests the bank is trying to get out in front of the SEC case, said Christopher Whalen, managing director of Institutional Risk Analytics.

"There's no place to hide, so if I were advising Mr. Blankfein I would tell him to get out there and tell the story," Whalen said. "Securities fraud claims are difficult to prove, especially a civil claim, so I think Goldman has an even chance of winning in court."

Questions have been raised about whether the SEC informed or coordinated its action against Goldman with the White House, which is in the midst of a push for new regulations on the financial industry.

In an interview Wednesday, President Barack Obama denied as "completely false" the notion that White House had advance knowledge of the case. Obama said the SEC is an independent agency and that the White House has no day-to-day control over it.

"They never discussed with us anything, with respect to the charge that will be brought," he said in the interview with CNBC. "So this notion that somehow, there would be any attempt to interfere in an independent agency is completely false."

SEC Chairman Mary Schapiro also denied any coordination with the White House in the Goldman case and stressed the agency's independence.

"We do not coordinate our enforcement actions with the White House, Congress or political committees," she said in a statement. "We do not time our cases around political events or the legislative calendar."

The big bank isn't the only one on the defensive. The billionaire hedge fund manager whose bearish bets were brought to light by the SEC case reached out to his investors a second day Wednesday to assure them the fund did nothing wrong.

John Paulson addressed investors in his Paulson & Co. hedge fund during a conference call that was described as upbeat by a person familiar with the discussion. He requested anonymity because the conversation was confidential.

Meanwhile, there were signs that the SEC may have a tough time proving its case. The SEC alleges the bank misled two investors who bought complex mortgage-related products that were crafted in part by Paulson. The hedge fund manager was betting the mortgages would fail. The agency says Goldman didn't disclose Paulson's intentions to the investors, IKB Deutsche Industriebank AG and ACA Management LLC.

But media reports Wednesday said that a former member of Paulson's firm told the SEC during its probe that he informed ACA Management that the hedge fund was planning to bet against the securities. A spokeswoman for the former employee, Paolo Pellegrini, declined to comment on the reports.

If true, Pellegrini's testimony would conflict with the heart of the SEC's charge that ACA was unaware of Paulson's negative bets.

SEC spokesman John Nester declined to comment on Pellegrini's reported testimony, saying only that: "Our case is built on a thorough evidentiary record that includes testimony, documents, handwritten notes and e-mails that will be presented in court at the appropriate time."

© Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


FinanceNews
Goldman Sachs is taking its fight against a government civil fraud case to Capitol Hill.Goldman CEO Lloyd Blankfein will testify before a Senate panel Tuesday in what are expected to be his first public comments on the Securities and Exchange Commission's lawsuit charging...
US,Goldman,Sachs
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2010-10-22
Thursday, 22 April 2010 08:10 AM
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