Goldman Sachs And SEC Put Meyer Lansky To Shame

[Policing Wall Street]

The problem with the Securities and Exchange Commission is that it is not run like a private law firm.

The SEC does not play to win and to represent the interests of its clients- the American public. In reality the SEC represents the Wall Street firms, who steal your money. The SEC plays to put on a show- and always backs down.

Thus in my article, “Goldman Sachs: The Great Deceiver,” which was published in The Black Star News on April 26, 2010, I demonstrated how the SEC had already won its case against Goldman Sachs in the ABACUS CDO, because Goldman’s own internal documents proved prima facie that Goldman had not disclosed material information in he CDO prospectus.

But the SEC threw the case when it came to fraud- as covered by the Section 10(b) of the Securities Exchange Act of 1934. It is here that the reader must understand that fraud is not only a civil offense but also a criminal offense- and that the company or the individual found guilty of violating Section 10(b) of the Securities Exchange Act can be charged with the criminal count of fraud in a criminal proceeding. So by refusing to charge Goldman with violations of Section 10(b) of the SEA, the SEC was playing to lose- and allowing Goldman to win. Not only that but damages in Section 10(b) are not limited to the loss, which the aggrieved party has incurred; there are penalties.

Section 10(b) states: “It shall be unlawful for any person…..
(b) To use or employ, in connection with the purchase or sale of any security… any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may proscribe as necessary or appropriate in he public interest or for the protection of investors.”

Rule 10b-5 Employment of manipulative and deceptive devices. “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, or practice, or course of business which operates or would operate as a fraud or deceit upon any person--In connection with the purchase or sale of any security.”

And here is the wording of Goldman’s consent decree, while not admitting guilt:
“Goldman acknowledges that the marketing materials for the ABACUS 2007-AC1 transaction contained incomplete information. In particular, it was a mistake for the Goldman marketing materials to state that the portfolio was “selected by” ACA Management LLC without disclosing the role of Paulson & Co. Inc. 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.”

It is important to note that “Goldman acknowledges that the marketing materials for the ABACUS 2007-AC1 transaction contained incomplete information.” This sounds like something was omitted to me; and, I have provided two cases that define Section 10(b) as preventing fraud.

In SEC v Kasser (1975) 391 FSupp 1167, the Court ruled: “Principal objective of fraud provisions of Section 10(b) of Securities Exchange Act is protection of American purchasers of, who are exposed to fraudulent offers of sales of securities in interstate commerce.”

In Resort Car Rental System, Inc. v Chuck Ruwart Chevrolet, Inc. (1975) 519 F2d 317, the Court ruled: “SEC Rule 10b-5 must be interpreted flexibly so as to prevent fraud; in applying rule, there is no room for doctrine of caveat emptor.”

To demonstrate that the SEC effectively threw the case against Goldman by not seeking stiffer penalties and by not examining other instances of fraud in the marketing of Collateralized Debt Obligations (CDOs) and Collateralized Mortgage Obligations (CMOs), I will examine whether it would be necessary for the SEC to prove that Goldman knowingly provided false information or knowingly made material omissions. This type of knowledge is termed scienter from the Latin verb, scio, scire, to know, to have knowledge of. (Note: Scire is also the root for the word science.)

In Vanderboom v Sexton (1970) 422 F2d 1233, the Court ruled: “Proof of scienter, in sense of knowledge of falseness of impression produced by statements or omissions made, is not required under Section 10(b) of Securities Exchange Act.”
In McGraw v Matthaei, (1972) 388 FSupp 84, the Court ruled: “Under Section 10(b) of Securities Exchange Act, the seller has duty to disclose those material facts which would not be revealed by buyer’s exercise of due care.”

In List v Fashion Park, Inc., (1965) 340 F2d 457, the Court ruled: “Unlike actions at common law, it is clear from statutory language of Securities Exchange Act, that affirmative misrepresentation is not necessary for violations under various statutes, but such statutory proscriptions encompass half-truths and failure to disclose material.”

In SEC v M. A. Lundy Associates, (1973) 362 FSupp 226, the Court ruled: “General antifraud provisions of Securities Exchange Act 10(b) and SEC Rule 10b-5 impose, upon persons engaged in sale of securities, strict duty of full disclosure and failure to disclose any material fact in relation thereto constitutes violation of such provisions.”

In Kohler v Kohler Co., (1963) 319 F2d 634 the decision read: “Antifraud provisions of Section 10(b) of the Securities Exchange Act was meant to cover more than deliberately and dishonestly misrepresenting or omitting material facts which ordinarily are badges of fraud and deceit; bad faith intent to mislead or misrepresent are not required to prove violation upon which civil remedy for damages will lie.”

In Kramer v Loewi & Co, (1973) 357 FSupp 83, the Court held: “Intent to defraud is not necessary element of civil action brought on basis of alleged violation of SEC Rule 10b-5.

And in the landmark case of SEC v Texas Gulf Sulphur Co., (1968) 401 F2d 833, the Court ruled: “So long as statement or omission made in connection with purchase or sale of any security has effect or tendency to mislead or deceive investing public, it violates antifraud provisions of Section 10(b) of Securities Exchange Act notwithstanding that purpose is not to so defraud or deceive.”

Proving the case that the SEC is actually protecting Goldman Sachs from the wrath of the American public and its craven representatives in Congress, we need only to read that tepid consent decree between the SEC and Goldman Sachs, 10-CV-3229 (BSJ) in its entirety.

Goldman agreed to pay $250 million to harmed investors; a fine of $300 million to the Treasury; and disgorgement of $15 million, which sum John Paulson paid to Goldman to structure and sell this toxic investment, ABACUS 2007-AC1.

It is my estimation that Goldman Sachs earned between $20 and $30 billion selling its toxic Collateralized Debt Obligations and Collateralized Mortgage Obligations. Hey, earn $30 billion and pay back $565 million. That’s an offer Goldman couldn’t refuse.
Goldman puts Meyer Lansky to shame.

Manfredonia was a trader on Wall Street. He was thrown out and blacklisted after he became a whistleblower.

"Speaking Truth To Empower."