The SEC announced this afternoon that Goldman Sachs agreed to settle, for $550 million, the civil lawsuit against it alleging materially misleading disclosures in circulars for some mortgage-backed securities it hawked. As I wrote on this blog, in a post of April 19 called SEC v. Goldman as a Simple Case, the case was simple.
In a bruising Consent to a Final Judgment in the federal case against it, Goldman acknowledges the point I made that makes the case simple. Its marketing circular said the reference portfolio was “selected by” the independent firm, ACA Management LLC, when in fact Paulson & Co. Inc., an interested party, played a role in that selection.
Within 30 days, Goldman must pay investors it misled by the marketing materials: $150 million to Deutsche Bank and $100 million to the Royal Bank of Scotland (known as ABN AMRO Bank when it bought Goldman’s securities). It must pay another $300 million to the SEC.
The SEC’s press release headlined that this amount set a “record” for the agency and is non-trivial even for a firm of Goldman’s size. Its enforcement chief, Bob Khuzami, boasted that “half a billion dollars is the largest penalty ever assessed against a financial services firm in the history of the SEC.”