Goldman Sachs Group Inc (NYSE: GS) was warned about pending charges against it as early as nine months before the SEC charges were brought.
SEC rules apparently do not require a public company to disclose the receipt of a Wells Notice from the agency. The notice is an indication that charges will be filed and a chance for the firm in question to make an argument for why it should not be.
Bloomberg reported:
“Goldman Sachs responded to the so-called Wells notice from the Securities and Exchange Commission within months and met with the agency officials trying to fend off the civil lawsuit.”
Goldman has been charged with creating CDOs and selling them to clients without disclosing that Paulson & Co. had helped picked securities within the CDO pool. Paulson went short the market in which the CDOs represents a long investment.
There will be a lengthy debate about why Goldman elected to keep the information about the Wells Notice private. The company filed two 10-Qs, its 10-K, and DEF 14A proxy over that time.It also paid tens of millions of dollars in compensation to key managers and senior executives, some of whom probably had knowledge of the CDO program. Why Goldman felt compelled to financially reward anyone even remotely involved with the incident when the firm knew about the investigation is anyone’s guess.
The Goldman compensation committee has some questions to answer, at the very least.
Douglas A. McIntyre
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