Just a few days ago, 18 Congresspeople led by Rep. Marcy Kaptur, D-Ohio, called for a criminal investigation of Goldman Sachs. That number has now swollen to 44, including Bart Stupak!

Note that although the SEC has filed a civil action (read it here) against Goldman Sachs it has no authority to take criminal action whereas the Department of Justice, headed by Eric Holder does. So too do attorneys general of the various states.

If you are an investor who lost money in one of Goldman’s schemes, or a private lawyer representing such a person, you can file your own civil case against Goldman Sachs/Paulson and don’t have to wait for anyone (see the discussion below at the Note).

Everyone else can join in the call for a criminal investigation of Goldman Sachs for its shady (and likely criminal-fraud) actions. The Progressive Change Campaign Committee has a petition allowing you as "citizen signer" to join in their campaign to have Eric Holder and the Justice Department investigate Goldman Sachs for criminal wrongdoings. To sign the form, go here.

The same web site (same link too) has the full letter from Rep. Kaptur demanding a DOJ investigation of Goldman Sachs. Since it is a matter of public record, here it is in its entirety:

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:


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.


Rep. Kaptur OH_09

The number of Congresspeople signing up to support Kaptur’s call for criminal action has snowballed from 18 to 44. Bart Stupak (yes, that Bart Stupak) is on board. Other notable representatives calling for a criminal investigation of Goldman Sachs include Rep. Grijalva, AZ_07; Rep. Ellison, MN_05; Rep. Stark, CA_13; Rep. Grayson, FL_08; and, Rep. Baldwin, WI_02.

Here’s a complete list of the congresspeople calling for this action:

Rep. Kaptur OH_09
Rep. Stupak, MI_01
Rep. Melancon, LA_03
Rep. Barrow, GA_12
Rep. Schauer, MI_07
Rep. Perriello, VA_05
Rep. Markey, CO_04
Rep. Heinrich, NM_01
Rep. McDermott, WA_07
Rep. Watson, CA_33
Rep. Carney, PA_10
Rep. Grijalva, AZ_07
Rep. Ellison, MN_05
Rep. Lewis, GA_05
Rep. Sutton, OH_13
Rep. Inslee, WA_01
Rep. Stark, CA_13
Rep. Honda, CA_15
Rep. Salazar, CA_03
Rep. Tsongas, MA_05
Rep. Grayson, FL_08
Rep. Loebsack, IA_02
Rep. Filner, CA_51
Rep. Jackson Jr., IL_02
Del. Holmes Norton, DC
Rep. Napolitano, CA_38
Rep. Hinchey, NY_22
Rep. Welch, VT
Rep. Holt, NJ_12
Rep. Fudge, OH_11
Rep. DeFazio, OR_04
Rep. Capuano, MA_08
Rep. Pascrell, NJ_08
Rep. Michaud, ME_02
Rep. Cohen, TN_09
Rep. Braley, IA_01
Rep. Pingree, ME_01
Rep. Speier, CA_12
Rep. Schakowsky,IL_09
Rep. Jackson-Lee, TX_18
Rep. Baldwin, WI_02
Rep. Lee, CA_09
Rep. Doyle, PA_14
Rep. Burgess, TX_26

If your congressperson isn’t on the list, pick up the phone and do something about it!

My only quibble (as a lawyer) with the call for action is that it doesn’t also call for an investigation of Paulson, the billionaire hedge fund owner who approached Goldman Sachs with the idea and who shorted the market. He could likely be charged (by an aggressive prosecutor) with at least criminal conspiracy, criminal conspiracy to defraud etc, since in law, the definition of a conspirator is so nebulous. All he would have had to do is to take one step to further a criminal-fraudulent action and Paulson apparently did much more than that!

The New York Times in a recent article noted that Goldman and other Wall St. kingpins could soon find themselves on the receiving end of investor lawsuits:

The S.E.C.’s action could also hit Wall Street where it really hurts: the wallet. It could prompt dozens of investor claims against Goldman and other Wall Street titans that devised and sold toxic mortgage investments.

On Saturday, several European banks that lost money in the deal said they were reviewing the matter. They could try to recoup the money from Goldman.

…“Any investor who bought these C.D.O.’s and lost a significant amount of money is probably looking at their investment and wanting to know: what were the details behind the sale?” said William Tanona, an analyst at Collins Stewart.

(emphasis added)


If you invested money in Goldman or through one of the packages that it put together with Paulson, or if you are a lawyer and represent someone like this, please strongly considering filing your own action against Goldman Sachs AND Paulson. You don’t have to wait for others to do it. Two shareholders of Goldman Sachs have already done this. Most states have very broad conspiracy and fraud statutes plus RICO (which allows treble damages) and unfair and deceptive trade practices (which also usually allow for treble damages) which can be used against both Goldman Sachs, its leaders and against Paulson and his company. I am amazed so few people have done this. The action can be filed in any federal court. Imagine having Goldman/Paulson/Blankfein in the dock in a jury trial!

YOU DON’T HAVE TO WAIT FOR ERIC HOLDER & THE OBAMA DOJ (because in my belief they will do NOTHING since Goldman Sachs long ago bought off Obama and his party and Obama and the Democrats want more $$ out of them).

Remember too that none other than Warren Buffett invested $5 billion in Goldman Sachs at the height of the 2008 financial crisis. Obama has admitted to "pal’in around" with uber-billionaire Buffett. Obama is also a good friend of "my friend Bob", none other than Robert Rubin, former head of Goldman Sachs. (See Dr. Kurt Murphy’s diary running on this subject here at FDL). Obama is smart enough to know that he shouldn’t bite his master’s hands that feed him: namely, Goldman Sachs, Robert Rubin, and Warren Buffett.

Lawyers can use the SEC complaint (found here) against Goldman Sachs as the template for your own lawsuit which can be based on several causes of action including: breach of fiduciary duty; fraud; criminal fraud; breach of criminal statutes; breach of SEC rules; RICO; unfair and deceptive trade practices, etc. At least two private lawsuits have been filed against Goldman Sachs over this matter.