Goldman Sachs Not 'Too Big For Jail', House Dems Write Attorney General

Democrats in the House are pressing the Justice Department to pursue a full-scale criminal investigation of Goldman Sachs, the bank hit last week with civil fraud charges by the Securities and Exchange Commission.

Led by Rep. Marcy Kaptur (D-Ohio), the group is asking more members of Congress to sign on to the letter to Attorney General Eric Holder requesting that "if the DOJ is not currently looking into this particular case, we respectfully ask you to ensure that the U.S. Department of Justice immediately open a case on this matter and investigate it with the full authority and power that your agency holds."

Reps. Chris Carney (D-Pa.), Keith Ellison (D-Minn.), Raul Grijalva (D-Ariz.), John Lewis (D-Ga.),
Jim McDermott (D-Wash.) and Diane Watson (D-Calif.) have signed the letter.

The Progressive Change Campaign Committee is working with Kaptur to encourage members to sign the letter, launching a petition that tells Congress that no organization is "too big for jail."

Read the letter:

The Honorable Eric Holder
United States Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, N.W.
Washington, DC 20530-0001

Dear Attorney General Holder:

The U.S. Securities and Exchange Commission (SEC) announced on Friday, April 16, 2010, that it had filed a securities fraud action against the Wall Street company Goldman Sachs & Co (GS& Co.) and one of its employees for making materially misleading statements and omissions in connection with a synthetic collateralized debt obligation ("CDO") that GS & Co. structured and marketed to investors. The SEC alleges that:

1. This synthetic CDO, ABACUS 2007- AC1, was tied to the performance of sub-prime residential mortgage-backed securities ("RMBS") and was structured and marketed by GS & Co. in early 2007 when the United States housing market and related securities were beginning to show signs of distress. Synthetic CDOs like ABACUS 2007-AC1 contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States housing market.

GS & Co. marketing materials for ABACUS 2007-AC1 - including the term sheet, flip book and offering memorandum for the CDO - all represented that the reference portfolio of RMBS underlying the CDO was selected by ACA Management with experience analyzing credit risk in RMBS. Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. ("Paulson"), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process. After participating in the selection of the reference portfolio, Paulson effectively shorted the RMBS portfolio it helped select by entering into credit default swaps ("CDS") with GS & Co. to buy protection on specific layers of the ABACUS 2007-AC1 capital structure.

In sum, GS & Co. arranged a transaction at Paulson's request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests, but failed to disclose to investors, as part of the description of the portfolio selection process contained in the marketing materials used to promote the transaction, Paulson's role in the portfolio selection process or its adverse economic interests.

As the SEC notes, financial manipulations such as this contributed to the near collapse of the U.S. financial system and cost American taxpayers hundreds of billions of dollars. On the face of the SEC filing, criminal fraud on a historic scale seems to have occurred in this instance. As an ever growing mountain of evidence reveals, this case is neither unique nor isolated.

If both global and domestic confidence in the integrity of the U.S. financial system is to be regained, there must be confidence that criminal acts will be vigorously pursued and perpetrators punished.

While the SEC lacks the authority to act beyond civil actions, the U.S. Department of Justice (DOJ) has the power to file criminal actions against those who commit financial fraud. We ask assurance from you that the U.S. Department of Justice is closely looking at this case and similar cases to further investigate and prosecute the criminals involved in this, and other financially fraudulent acts. Furthermore, if the DOJ is not currently looking into this particular case, we respectfully ask you to ensure that the U.S. Department of Justice immediately open a case on this matter and investigate it with the full authority and power that your agency holds. The American people both demand and deserve justice in the matter of Wall Street banks whom the American taxpayers bailed out, only to see unemployment and housing foreclosures rise.

This matter is of deep importance to us. As you may know, H.R. 3995, the Financial Crisis of 2008 Criminal Investigation and Prosecution Act, has been introduced, which authorizes you to hire more prosecutors, Director Mueller of the Federal Bureau of Investigation to hire 1,000 more agent as well as additional forensic experts, and Chair Mary Shapiro of the U.S. Securities and Exchange Commission to hire more investigators to continue to pursue justice and route out the criminals in our financial system. Part of financial regulatory reform should include removing the criminals and crafting a system that supports those who follow the law.

We in Congress stand ready to support you in protecting the American taxpayers from financial crimes such as the fraud that the U.S. Securities and Exchange Commission has charged Goldman Sachs with committing. We ask that you take up this case, and others, to pursue justice for the American people, to put criminals in jail, and seek to restore the integrity of our nation's financial system.

Sincerely,

Marcy Kaptur
MEMBER OF CONGRESS

Comments

[Jayne Stahl]

12:48 AM on 04/22/2010

http://www.huffingtonpost.com/jayne-lyn-stahl/campaign-finance-decision_b_437102.html I knew this whole concept looked familiar to me. At the link is a piece about mirandizing banks which may have seemed implausible then, but which is looking more and more plausible by the minute.

Now that the Supremes have made a proper lady of corporate whores, they may as well go all the way and handcuff them.

[geneg75075]

06:15 PM on 04/21/2010

I think one of the best medicines for the current financial situation would be to decapitate the architects of our current financial mess and post their heads on pikes leading into the Wall Street Stock Exchange. Might make the next bunch of kleptocrats think twice.

[Pete2112]

11:08 AM on 04/21/2010

This civil suit against GS is just a show. It was timed perfectly to drum up support for Dodd's Financial Reform Bill, a bill that keeps GS intact and keeps the possibility of bailouts on the table. This is nothing but a theater production, and you can bet that when the actors step offstage they're back to being friends and co-workers (or maybe co-conspirators is a better word) Th eplan is for Obama and Dodd to get their bill passed, and then, a couple of yrs later, GS pays a small fine.

REAL enforcement would be criminal prosecution. This civil stuff is Obama and Dodd giving the angry proles a mock execution that they can cheer and feel good about. But behind the scenes it's business as usual.

[waynesmyer]

07:27 AM on 04/21/2010

WTF is the matter with the DOJ (Department of Justice?) The "RICO" statutes were created to prosecute just t he type of criminal conspiracy that was committed by Goldman-Sachs, Lehman Bros. and a number of other so-called "investment houses" .. So why has the DOJ failed to pursue a "RICO" case?
Alberto "Fredo" Gonzalez and Alice Fisher are no longer in charge! Right?? The 21 billion dollars in "Bonus Money" should be transferred to DOJ to hire attorneys to run down and prosecute "RICO" cases.
The threat of doing hard time in Leavenworth would turn a lot of the "money changers" to give state's evidence against their bosses! So WTF is the DOJ doing about it? Is there no justice at Justice???

[VietnamVeteran]

09:35 PM on 04/20/2010

New Headline. 50 State Attorney Generals to Investigate, Prosecute, and Fine Goldman and Others..

Prosecute and fine with extreme prejudice. Watch bank stocks (investment banks and commercial) plummet once again.........Attorney Generals will be charging ahead with fines. Let the bleeding cleanse the fraudulent. Let's jail mainstream the guilty with prison population. This last collapse could have been prevented. No balls (previously) at SEC. No experienced "I give a shot" attorneys working there. Staff standing in awe of the bright shining lie.

CDO’s were underlying assets in BILLIONS of bond fund investments, sold to the public by brokers and bankers as less risk and conservative investments.

Join the party; contact your state's attorney general for more justice. States residents who lost money are entitled to recover their loss. Let's go.

[JVM Fan]

08:05 PM on 04/20/2010

I just saw a movie on Sunset Blvd. called "Stock Shock" about all this Wall Street corruption and the audience was pretty shocked. It was the same story told through the eyes of Sirus XM investors that nearly went broke because of market manipulation. The movie is now sold on DVD just about everywhere, but cheaper at www.stockshockmovie.com

[johnhuffy]

07:47 PM on 04/20/2010

Go Marcy!

[cornsilk]

07:31 PM on 04/20/2010

Thank you for publishing this petition. Maybe the financial analysts still touting GS shares on Wall Street as a Buy should read it before tomorrow's bell. There's still time to help your investors on this one Bove.