Goldman Settles With SEC For $550 Million (GS)

Goldman Sachs has agreed to settle a fraud case brought by the SEC for $550 million. The lawsuit was filed against the Wall Street securities firm in April and has weighed heavily on the firm. The accusations revolved around a CDO deal that Goldman Sachs GS put together for hedge fund Paulson & Co. The SEC accused Goldman of misstating and omitting key facts regarding the CDO and failing to disclose the fact that Paulson & Co. was shorting the security, which GS sold to other investors. The press release announcing the settlement states that "Goldman acknowledges that the marketing materials for the ABACUS 2007 AC1 (the CDO in question) transaction contained incomplete information. In particular, it was a mistake for the Goldman marketing materials to state that the reference portfolio was "selected by" ACA Management LLC without disclosing the role of Paulson & Co. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure." Goldman has not admitted or denied the allegations brought by the SEC, and therefore has not admitted to committing any fraud, but will pay $550 million to settle the matter. The firm has also agreed to examine some of its business practices. GS shares spiked on rumors that there would be a settlement and closed Thursday's trading session 4.43% higher at $145.22. In after hours trading the shares have added another 4.33% and are trading at $151.51.