Did Goldman Lie To Calpers When Seeking Consulting Mandate?

Remember long ago in late April when people actually discussed Goldman Sachs and its criminal charges of CDO fraud? Not really? Now may be a good time to remember what some said was the biggest fraud investigation in history, because according to new developments not only is Goldman still in very hot water (Fox Business disclosed earlier that the SEC added veteran litigator David Gottesman to its group of attorney trying the Goldman case), but according to a new report by Reuters' Matt Goldstein, the firm lied to Calpers in March, when it was seeking a consulting mandate from the pension giant, claiming it was not "the target of a formal investigation." Calpers apparently is not too happy about this: "Calpers spokesman Brad Pacheco told Reuters the pension fund's investment staff "will be reaching out to Goldman for an explanation on their response." The investment staff is finalizing contracts for Calpers' consultant pool, which will be effective July 1." Needless to say, Goldman's chances of taking a slice out of Leon Black's pie are looking bad to quite bad.

From Reuters:

Goldman Sachs Group Inc, seeking a consulting mandate from Calpers, assured the pension fund giant in March that it was not "the target of a formal investigation," according to a document obtained by Reuters.

That was six months after U.S. securities regulators notified the powerful Wall Street bank that it was likely to be charged with fraud in connection with the underwriting and marketing of a $1 billion subprime-mortgage-linked security.


Goldman's response to Calpers could reignite the debate about whether the Wall Street firm had an obligation to inform shareholders and potential clients that the SEC had sent it a so-called Wells Notice -- a letter alerting the firm of the likelihood of a regulatory enforcement action.


Pacheco said Goldman is one 32 firms the giant pension fund is considering to serve as consultants on real estate-related investments. He said Calpers has not yet made a decision about hiring Goldman or any of the other firms and that its investment staff is in the process of finalizing contracts for the consultant pool.

A Goldman spokesman declined to comment.

Goldman previously has said it did not disclose the Wells Notice in regulatory filings because its lawyers concluded the issue was immaterial to the firm's overall revenues.


Goldman's application to Calpers, obtained by Reuters, was not submitted under oath, and it is not known if the document was reviewed by Goldman's counsel's office. The application is signed by Kristin Gannon, a Goldman managing director and West Coast head of real estate investment banking for the firm.

Goldman's comment on the Calpers application that it was not the target of a formal investigation was made in response to a question seeking information about "any business litigation or other legal proceedings relating to your consulting activities."

The punchline from the Goldman application:

"Our experience shows that if we serve our clients well, our own success will follow," the firm wrote. In response to another question, Goldman said it "treats all of our clients as partners."

How about giving all of its client "partners" immediately vesting shares of Goldman stock to go with that promise? That should resolve all issues about not only how incentivized everyone is to go along with the Goldman monopolistic monolith, but will remove any and all future conflicts of interest. In fact, Goldman should just offer its clients a pass thru option of its BHCs status and give everyone a cut of its borrowings from the Fed's discount window. If Goldman continues trading as a government backstopped hedge fund, and if the corrupt politicos refuse to do anything to prevent Goldman from blowing up the world economy once again, perhaps the prudent thing is to allow the next megacrash to occur faster by lowering the entire world's cost of capital to zero, so that everyone can buy what GS says to buy and vice versa. In fact, Goldman should just allow open access to all client-partners who wish to trade on its prop trading desk. That way the bar will be set equal to everyone. No more lawsuits against the firm ever again.