Behind The Scenes: Did A Goldmanite Lose Their Job Over The SEC Investigation? And Just How/Why Did Goldman Purchase C-BASS For Pennies On The Dollar?

Tyler Durden's picture

Some terrific investigative reporting by Matt Goldstein at Reuters discloses that while Lloyd Blankfein is aggressively defending Tourre, claiming the Frenchman did nothing wrong despite earlier reports that he was deregistered by the FSA, and the Telegraph now chiming in he has now in fact been barred in a major setback for Goldman's defense, another Goldman employee who was part of the 18-month SEC investigation, mysteriously departed in June of 2009. The person in question: Gail Kreitman, a 1991 Wharton grad, who had previously worked at Merrill (1997-2003) and Lehman (2003-2006) according to her Finra records, before finally landing at Goldman for a three year stint as a "GS&Co. Sales Rep." Gail had been identified previously in the initial Goldman Wells response, and was named as a person whose sworn testimony may have been the catalyst for the SEC's case against Goldman Sachs. Where the plot really thickens is a cursory glance at the bio of her husband, Jeffrey Toll, who according to Bloomberg is a Co-Founder of now-defunct C-BASS (Credit-Based Asset Servicing and Securitization) a company formed with initial funding by mortgage insurers MTIG and Radian. For those unfamiliar, "C-BASS was a leading issuer, servicer, and investor specializing in credit-sensitive residential mortgage assets. These assets included performing subprime and Alt A, nonperforming, reperforming, second lien and small commercial loans, as well as subordinated and mezzanine RMBS with prime, subprime, Alt A and high LTV collateral" and that "It currently is liquidating its existing portfolio and returning the cash proceeds received to its lenders and investors." One wonders just what Ms. Kreitman did to merit the severance of her ties with Goldman, and whether C-BASS was in any way involved, or whether it had any dealings with Goldman's now infamous mortgage group, ala ACA?

Goldstein reports:

Gail Kreitman, the former Goldman bond saleswoman, is not named as a defendant in the Securities and Exchange Commission's lawsuit against Goldman and another of the investment firm's bond salesmen, Fabrice Tourre. Kreitman is not even identified by name in the complaint.

But Kreitman, who left Goldman in June 2009, was interviewed by securities regulators during the course of their 18-month investigation, and some of her email communications are cited by the SEC in the 22-page complaint.

The SEC points to some of Kreitman's emails as part of its claim that Goldman and Tourre misled ACA Capital Management, the outside manager tapped to oversee the transaction, about hedge fund giant Paulson & Co's economic interest in the deal.

Kreitman is not identified by name in the emails cited in the complaint. The SEC refers to her simply as a "GS&Co. sales representative."

But in a lengthy legal filing submitted to the SEC last September, lawyers for Goldman Sachs try to explain away the emails between Kreitman and ACA executive Laura Schwartz. Goldman's attorneys contend that Kreitman did not intend to give ACA officials the impression that the hedge fund was either an equity investor or "long" on the deal.

"The fact that Ms. Kreitman did not correct Ms. Schwartz's statements that Paulson was an equity investor does not indicate that she attempted to conceal the truth from ACA," said lawyers from the New York firm Sullivan & Cromwell, Goldman's outside counsel.

Goldman's outside lawyers in the filing downplayed Kreitman's role in engineering the so-called synthetic collateralized debt obligation called Abacus 2007-AC1. The lawyers said Kreitman was merely an "intermediary" whose main job was to "manage the relationship for ACA."

The Goldman lawyers even suggest Kreitman, who previously worked at Lehman Brothers and Merrill Lynch before coming to Goldman in 2006, may not have "understood the significance of Ms. Schwartz's statements suggesting she believed Paulson to be an equity investor."

What again is most notable about this situation is that Ms. Kreitman, who currently lives in Livingston, NJ (we attempted to reach her listed phone number but got only voicemail) left Goldman in the middle of last year: hardly a time when one departs a company especially without some like replacement - no additional record of her being employed currently is indicated by Bloomberg.

Yet, as pointed out, a glance at her husband's bio via Bloomberg led to some surprises:

Here is some additional color on what precisely Kreitman did at Goldman according to the initial Wells Response:

The record shows that Ms. Kreitman, who provided sales coverage on ACA, acted as an “intermediary between the [various] trading desk[s] and clients.” (Kreitman Tr. 11.). Ms. Kreitman?s role in 2007-AC1 was to “manage the relationship for ACA,” meaning that she “acted as an intermediary between the trading desk and [ACA] facilitating meetings and phone calls.” (Id. at 27-28.) She did not “attend or participate [in the meetings she arranged]” relating to the 2007-AC1 transaction, nor was she “involved in” the creation of the 2007-AC1 CDO. (Id. at 31-33.) Nothing in the record suggests that Ms. Kreitman understood the significance of Ms. Schwartz?s statements suggesting that she believed Paulson to be an equity investor, much less that Ms. Kreitman acted with scienter or departed from the standard of ordinary care by not correcting them.

And just as ACA ended up being allegedly on the wrong side of the Paulson trade, we wonder whether Ms. Kreitman's coverage list also included C-BASS, as well as potentially MTIG and Radian. Was she also responsible for selling structured products or investment ideas to a firm in which her husband was the co-founder? If so, is there any incremental liability involved over and above what happened in terms of Goldman disclosure with ACA, which is as the heart of the SEC case, and in which Ms. Kreitman, it appears, was instrumental in providing information to the SEC, which may or may not have been the key info on which the SEC's entire case rests?

Was Ms. Kreitman fired in retribution for inappropriate disclosure to the SEC? Was she fired in fear of what else could be uncovered should someone dig deeper? Is she now a cooperating witness with the SEC? Is her husband's role at C-BASS being used as leverage, especially if indeed there were any relations between Goldman and the bankrupt firm? Was C-BASS used, knowingly, as a comparable patsy to ACA? Did MTIG and Radian shareholders lose all, if indeed Goldman was selling them securities of the same type as Abacus with the witting knowledge of people on both sides of the transaction? Or did she just leave voluntarily on amicable terms in the middle of the worst year for Wall Street employment in history?

Zero Hedge will continue to pursue these questions over the next few days.

What we do know is that at the end of the day, the remains of C-BASS were sold off to the Archon Group umbrella, owned by... Goldman Sachs.

You do the math.

We also certainly will dig into the other people who provided sworn SEC tetimony: Melanie Herald-Granoff, Michael Nartey, and David Gerst (in addition to Fab Fab of course).

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Rainman's picture

Lloyd's gonna' bring a circus midget to his hearings. That should loosen up the crowd. 

Problem Is's picture

"Lloyd's gonna' bring a circus midget to his hearings."

Neel "Down Bitch" Kashkari is going to reprise his Mini-me role?

I can't wait... "Dennis K., bitch alert, Hearing Room 1..."

ghostfaceinvestah's picture

That's interesting. Not sure if this is related, but MTG announced today that they are going to try to raise $1B: $300M in convertible debt, $700M in equity. This is a company that isn't expected to turn a profit until 2012 (and hasn't had a quarterly profit since 2007). Apparently the equity offering isn't going so well (what a surprise).

The sole bookrunner?

Do I really need to tell you?

doggis's picture

yes please - do TELL!!!! i gotta know!! someone in my office just yelled out it was cameron diaz.......yeesh!

ZeroPower's picture

Wow. Sole bookrunner too.

I noticed in Canada most offerings roughly >$500MM always have at least 1 lead and a few juniors assisting with the deals. Of cours when its GS i understand theyre only good enough to be the one and only on any and all issues!!

Cheeky Bastard's picture

You have to know one thing [this might not sound sophisticated but it will hold truth]

Despite all their rhetoric all these firms operate on the same principles as does the Russian mob. You are allowed to do anything you want as long as it benefits The Firms bottom line. You will be well paid; you will be taken care of with all sorts of benefits and luxuries; all provided by The Firm. But if/when you get caught in doing something The Firm knew you were doing all the time and supported you in that pursuit, The Firm will pretend not to know you, what you have been up to, why were you doing something when the laws clearly state that you can not do it. Then if you try to save your own skin via cooperating with proper authorities/agencies The Firm will do anything in its power to intimidate you in order for your cooperation to stop. If it does not intimidate you, The Firm will kill you via methods which will never indicate any foul play happened and that you just killed yourself by shooting yourself six time in the face with a double barrel shotgun. If you decide to take your own life The Firm will take care of your family by paying it annuities from your pension fund/life insurance. The Firm never loses. The Firm doesn't even exist.

doggis's picture

gives one a 'warm and fuzzy' feeling all over.......

Roscoe's picture

So... If I'm reading you right, Lloyd and the pope and the Russian godfather(Putin?) hold similar positions. And, if the church, the mob and GS merged, they could save a ton by cutting redundant back office staff, and the whole deal would be immediately acretive. Viola! The Holy Goldman Empire & Collection Services, Inc. Oh, and the church would bring sovereign immunity to the company, so no more pesky legal problems, simply quiet reassignments and sealed settlements, or termination via the popular Anton Kalashnikov clause 47.

knukles's picture

Lloyd and Vlad are pedeophiles, too?  When did this come out?  Hah haha hah ha

Orly's picture

I can only shake my head in shame, having once been many of these things- but I know it is true.

(And none of them is pedophile.)

Mentaliusanything's picture

And pedophilia IS permitted ( the screams OH lord OH Lordy are heard muffling real pain)

And the rest they say is History - who pays? just your ass while the "big Boys" get paid there stipend (notice end)  

Jefferson's picture

Just like the Clinton family.

Mentaliusanything's picture

Lloyd B on witness stand under direct questioning and burring up; background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; min-height: 50px; background-position: 0% 0%; background-repeat: no-repeat no-repeat; margin: 0px;">

“You want the truth?  You can’t handle the truth.  Son, we live in a country with an investment gap.  And that gap needs to be filled by men with money.  Who’s gonna do it?  You?  You, Middle Class Consumer?  Goldman Sachs has a greater responsibility than you can possibly fathom.  You weep for Lehman and you curse derivatives.  You have that luxury.  You have the luxury of not knowing what we know: that Lehman’s death, while tragic, probably saved the financial system.  And that Goldman’s existence, while grotesque and incomprehensible to you, saves pension funds.  You don’t want the truth.  Because deep down, in places you don’t talk about at parties, you want us to fill that investment gap.  You need us to fill that gap.

“We use words like credit default swaps, collateralized debt obligation, and securitization…  We use these words as the backbone of a life spent investing in something.  You use ‘em as a punchline.  We have neither the time nor the inclination to explain ourselves to a commoner who rises and sleeps under the blanket of the very credit we provide, and then questions the manner in which we provide it!  We’d rather you just said thank you and paid your taxes on time.  Otherwise, we suggest you get an account and start trading.  Either way, we don’t give a damn what you think you’re entitled to!”


From an excellent blog @



Cheeky Bastard's picture

I salute you and your genius dear sir/madame 

Outfuckingstanding comment.

+ the notional value of all financial derivatives 

MsCreant's picture

Jack Nicholson is too good, too male, to play Lloyd. 

Who do we put in the role?

cougar_w's picture

That's a lot of "ifs" ya got there Sparky, that woud be best wired up by some 'splain'n from Frau Kreitman ...

... whom we can assume knows how stay out from under a bus?

I'd suggest a vacation in Switzerland, in fact. Just leave your travel plan with the DoJ so they can catch up with you in about 3 months.

economists_do_it_with_models's picture

Wow.  Very interesting tidbits of informaton!

"There has to be a way to bring down this bank."  ~from "The International"

DavosSherman's picture

When I read the title my first question was: "Which government official got fired."

williambanzai7's picture

"It is always better to sacrifice your opponent's men."
Savielly Tartakower

williambanzai7's picture

"I'd like to share a revelation that I've had during my time here. It came to me when I tried to classify your species and I realized that you're not actually mammals. Every mammal on this planet instinctively develops a natural equilibrium with the surrounding environment but you Wall Street bankers do not. You move into an investment space and you multiply and multiply until every capital resource is consumed and the only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. Do you know what it is? A virus. Wall Street bankers are a disease, a cancer of the global economy. You're a plague and we are the cure."

Agent Smith


Cheeky Bastard's picture

I see a pattern developing here

Also, nice job.


VegasBD's picture

Alas the copywriters of the world found ZH!

Love it!

Rainman's picture

    + 1,000

     Agent Smith

Cheeky Bastard's picture

" Let me give you a little inside information about Warren Buffett. Warren Buffet likes to watch. He's a prankster. Think about it. He gives Goldman Sachs the capital it needs. He gives us this extraordinary gift, and then what does he do, I swear for his own amusement, his own private, market gag reel, He sets the competing trades in opposition to ours. It's the goof of all time. Trade but don't profit. Profit, but don't pay out bonuses. Pay out bonuses, but in deffered comp and stocks. AhahaHAHAHAHA. And while you're jumpin' from one foot to the next, what is he doing? He's laughin' His sick, fuckin' ass off! He's a tight-ass! He's a SADIST! He's an absentee landlord! Give a decent ROI to him? NEVER! "

Lloyd Blankfein, CEO of Goldman Sachs

Goldman Sachs 10-Q 1q10

Cheeky Bastard's picture

"And as we're straddling from one deal to the next, who's got his eye on the planet, as the air thickens, the water sours, and even the bees' honey takes on the metallic taste of radioactivity? And it just keeps coming, faster and faster. There's no chance to think, to prepare; it's buy futures, sell futures, when there is no future. There is only Goldman Sachs"

Lucas van Praag, Head PR Department, Goldman Sachs in an address given to participants of the 2009 "Superiority of Goldman Sachs and Cockroachness of other humans" summer training camp.

Hampton, NJ.

Ned Zeppelin's picture

Down the rabbit hole we go, where it stops, nobody knows.

Alienated Serf's picture

We know where it stops.  Hyperinflation, Trade Protectionism, Collapse of world trade, World War, new order. 

Problem Is's picture

Tyler, I have a question:

2 weeks ago, it was announced every one's favorite AIG Insurance salesman Joe "What Me Worry" Cassano won't be charged with anything for anything...

in AIG's implosion and $180 billion tax payer bailout (that John Q. F. Public knows about)...

Hey, I guess Cassano was just trying to make a living and well maybe some bad judgement selling Goldman and JPM all that insurance his firm could not cover?

Two Weeks Ago, Cassano No Charges?

Would Cassano have been involved in writing all the swaps for Paulson and Lloyd B. God?

Is it possible to get that "Get Out of the SEC Free" card, Cassano answered SEC questions:

"God. John. Cohn. God. Viniar. John."

"Hey play it backwards and it's a Beatles album!... sorry."

"Cohn. God. John. Viniar. God..."

Just wondering...

williambanzai7's picture

I am not sure this was officially announced. It was reported by the press, but I saw no official statement. That means the investigation is continuing.

Problem Is's picture

Thanks william. You are correct:


"Recently obtained evidence has prosecutors leaning against pursuing charges, though no final decision has been made by Justice Department prosecutors in Washington, these people said. A Justice Department spokeswoman declined to comment."

buzzsaw99's picture

In keeping with the theme:

The path of the righteous man is beset on all sides by the allegations of the foolish and the self-righteous accusations of average men. Blessed is he, who in the name of greed and avarice, shepherds the bankers and politicians through the valley of darkness, for he is truly his brother's keeper and the finder of lost bonuses. And I will strike down upon thee with great vengeance and furious anger those who would attempt to poison and destroy my brothers. And you will know my name is the Lord Blankfein when I lay my vengeance upon thee.

Problem Is's picture

"Let me tell you something, pendejo."

"You pull any of your crazy shit with us, you flash a piece out on the lane, I'll take it away from you, stick it up your ass and pull the fucking trigger until it goes click..."

"You said it, man."

"Nobody fucks with the Jesus."

Gromit's picture

IMHO the value of a mortgage insurance entity lies not in its earnings or equity but in the ability to control which claims are paid.

Roscoe's picture

Hey! If any of you are looking for any last-minute gift ideas for me. I have one……..I’d like Lloyd Blankfein, my banker, right here tonight.

I want him brought from his happy holiday slumber over there on Maiden Lane with all the other rich banker fraudsters and I want him brought right here, with a big ribbon on his head, and I want to look him straight in the eye and I want to tell him what a cheap, lying, no-good, rotten, four-flushing' low-life, snake-licking, dirt-eating, inbred, overstuffed, ignorant, blood-sucking, dog-kissing, brainless, dickless, hopeless, heartless, fat-ass, bug-eyed, stiff-legged, spotty-lipped, worm-headed, sack of monkey shit HE IS!…

…..Hallelujah!  Holy shit!  Where’s the Tylenol?

- Clark W. Griswold, Non-Nutritive Cereal Varnish Inventor


RobotTrader's picture

No. 1 Banner Ad on ZH today:

I clicked on it, and it said....

"Due to abnormally high server activity, we are unable to process your request at this time"


Mr Lennon Hendrix's picture

We were wondering why MB has not been posting.  Answer given!

Howard_Beale's picture

Well he had to be somewhere! Now we know.