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Goldman Sachs's 1st Response to SEC Wells Notice

Goldman Sachs's 1st Response to SEC Wells Notice

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Published by DealBook
Goldman Sachs's first response to the Securities and Exchange Commission's Wells notice, sent Sept. 10, 2009.
Goldman Sachs's first response to the Securities and Exchange Commission's Wells notice, sent Sept. 10, 2009.

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Published by: DealBook on Apr 19, 2010
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05/24/2012

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FOIA CONFIDENTIAL TREATMENTREQUESTED BY GOLDMAN, SACHS & CO.
UNITED STATES OF AMERICAbefore theSECURITIES AND EXCHANGE COMMISSION- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xIn the Matter of ABACUS CDO:::::File No. HO-10911- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
SUBMISSION ON BEHALF OF GOLDMAN, SACHS & CO.
Richard H. KlapperMichael T. Tomaino, Jr.Christopher J. DunneS
ULLIVAN
&
 
C
ROMWELL LLP
 125 Broad StreetNew York, NY 10004
 Attorneys for Goldman, Sachs & Co.
 
 
 - i -
TABLE OF CONTENTSPage(s)
PRELIMINARY STATEMENT ................................................................................................ 2
 
THE RECORD............................................................................................................................ 6
 
A.
 
Relevant Parties .................................................................................................. 6
 
1.
 
Goldman Sachs ....................................................................................... 6
 
2.
 
ACA ........................................................................................................ 7
 
3.
 
Paulson .................................................................................................... 7
 
4.
 
IKB .......................................................................................................... 8
 
5.
 
ABN ........................................................................................................ 9
 
B.
 
The Subprime and CDO Market ......................................................................... 9
 
C.
 
The ABACUS Transactions Generally ............................................................. 10
 
D.
 
ABACUS 2007-AC1 ........................................................................................ 11
 
1.
 
The Paulson Reverse Inquiry ................................................................ 11
 
2.
 
The Portfolio Selection Process ............................................................ 12
 
3.
 
Marketing and Sale of the 2007-AC1 Transaction ............................... 13
 
E.
 
The Credit Default Swaps Between Goldman Sachs and Paulson ................... 14
 
F.
 
The Collapse of the Subprime Market .............................................................. 15
 
THE STAFF‟S INVESTIG
ATION AND ALLEGATIONS .................................................... 17
 
DISCUSSION ........................................................................................................................... 17
 
I.
 
THE ABACUS OFFERING DOCUMENTS CONTAINED NO MATERIALMISREPRESENTATIONS .......................................................................................... 17
 
A.
 
The Offering Documents Fully Disclosed the Material Facts Relating to theReference Portfolio ........................................................................................... 18
 
B.
 
The Sophisticated Investors in 2007-AC1 Were More Than Capable of Evaluating the Transaction Based on the Portfolio Information ...................... 21
 
C.
 
To the Extent that Investors Considered
ACA‟s Participation Important,ACA‟s Role Was Described Accurately
........................................................... 23
 
D.
 
Paulson‟s Economic Interests Were Not Material to Investors
........................ 25
 
 
 - ii -E.
 
Investor Losses Were Attributable Solely to the Overall Market Collapse andNot to Any Alleged Misrepresentations by Goldman Sachs ............................ 28
 
II.
 
THERE IS NO EVIDENCE THAT GOLDMAN SACHS ACTEDNEGLIGENTLY, LET ALONE WITH THE LEVEL OF SCIENTER REQUIREDTO SUPPORT A SECTION 10(b) CLAIM ................................................................. 30
 
A.
 
Goldman Sachs Did Not Mislead ACA Regarding Paulson‟s Involvement in
the Portfolio Selection Process ......................................................................... 32
 
B.
 
No Evidence Supports an Inference that Goldman Sachs Retained ACA orCharacterized ACA as the Portfolio Selection Agent in Order to DeceiveInvestors ............................................................................................................ 35
 
III.
 
THE STAFF‟S THEORY T
HAT GOLDMAN SACHS COMMITTED FRAUDBY FAILING TO DISCLO
SE PAULSON‟S ROLE MI
SCONCEIVES THEFUNCTION AND OBLIGATIONS OF A BROKER-DEALER ................................ 38
 
CONCLUSION ......................................................................................................................... 40
 

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