DA's probe fuels heat on Goldman Sachs

Goldman Sachs has received a subpoena from the Manhattan District Attorney's office, putting further legal pressure on the investment bank over its actions in the lead-up to the international financial crisis.

The District Attorney, Cyrus Vance, is seeking information from Goldman relating to the conclusions of a damning Senate investigation into the company and its Wall St peers this year.

The Senate permanent sub-committee on investigations said the bank sold mortgage derivatives to its clients while at the same time betting that the mortgage market was about to tank, and it also said Goldman executives may have lied under oath at Senate hearings on the subject.

Last year, Goldman paid US$550 million to settle Securities and Exchange Commission fraud charges relating to one mortgage derivative, in what the bank hoped would end controversy over its actions.

But the settlement achieved no such thing. The US Justice Department is also investigating the bank.

As Wall St's most powerful institution, Goldman has been the lightning rod for public and political anger over the excesses that led to the financial crisis of 2007-2009.

Yesterday, the company said: "We don't comment on specific regulatory or legal issues, but subpoenas are a normal part of the information request process and when we receive them we co-operate fully."

Subpoenas are formal requests for information, and do not indicate civil or criminal charges are likely.

Goldman has always maintained that - with the exception of incomplete disclosures in one mortgage deal - it did nothing wrong during the credit bubble and bust, and that it properly managed any conflicts of interests between it and its clients.

Analysts disagree over whether the latest investigations are likely to result in charges and big fines.

"They want Goldman Sachs to show some sort of contrition," said Dick Bove of Rochdale Securities. "The blood is in the water and the sharks will all come."

- Independent