Goldman facing claims for compo

BERLIN - Goldman Sachs may face claims for financial compensation from European Governments and investors in connection with the fraud case brought against the investment bank by the United States Securities and Exchange Commission.

Britain and Germany, whose Governments had to bail out banks that lost money due to what the Securities and Exchange Commission (SEC) says was Goldman's misbehaviour, are both looking into the case, while analysts say that lawsuits from investors - against Goldman and other banks that marketed complex mortgage-backed securities - are almost inevitable.

The German Finance Ministry, the Government-owned KfW development bank and IKB Deutsche Industriebank, which the SEC says lost US$150 million ($210 million) in investments marketed by Goldman, all said they were looking into the case and would not rule out any option.

"After checking all facts, the public domain will examine closely if there are any possibilities for compensation, but at this point it is too early to speculate," Finance Ministry spokeswoman Jeanette Schwamberger said.

The US charges against Goldman Sachs relate to a complex investment tied to the performance of pools of risky mortgages.

In a complaint filed last week, the Securities and Exchange Commission alleged that Goldman marketed the package to investors without disclosing that the pools were picked by another client, a prominent hedge fund that wanted to bet the US housing bubble would burst.

Within months, most of the mortgages had been downgraded as the US housing boom went into reverse and the securities fell sharply in value.

The company denies it did anything wrong, saying investor losses came from the deterioration of the whole sector, not regarding which securities were in the pool.

IKB was Germany's first victim of the financial crisis, in 2007. It had to be rescued with the help of KfW - which held a minority stake at the time it wobbled but later took over 90 per cent of the troubled bank.

KfW sold its share to Dallas-based Lone Star Funds in 2008, losing US$7.2 billion in the deal, according to KfW spokesman Wolfram Schweickhardt.

IKB said in a written statement that it would check the SEC papers and "will closely look at any possible measures". Spokesman Patrick von der Ehe said all options were on the table, but wouldn't elaborate.

KfW spokesman Schweickhardt said his bank was looking into the matter and trying to get all the facts.

The Finance Ministry said that, if anyone, KfW would be the one to claim compensation for the German taxpayer, according to the Finance Ministry.

"At this point it is much too early to say anything substantial," Schweickhardt said.

British interest in the case is likely to focus on Royal Bank of Scotland, which paid US$841 million to Goldman Sachs in 2007 to unwind its position in a fund acquired in the takeover of Dutch Bank ABN Amro, according to the SEC charges.

"As you would expect, the FSA is investigating the circumstances of this case and whether there are any implications for the UK-regulated entities of Goldman Sachs," the British financial regulator said in a statement.

"If there are, we will take appropriate action. We work closely with overseas regulators and will be co-operating fully with the SEC investigation."

The European Union is also keeping a close eye on the US investigation.

"We are obviously following events with great interest," spokeswoman Amelia Torres said.

Analysts say that civil suits in the wake of the SEC case against Goldman Sachs are inevitable - in fact some are already in motion.

The Netherlands' Rabobank sued Merrill Lynch in June 2009, seeking US$45 million in damages in a case it says is similar to the Goldman Sachs case.

- AP