United States Attorney Southern District a/New York

V.S. Department of Justice

The Silvio J. Mollo Buildtng One Saint Andrew's Plaza Nell' York, New York 10007

March 21,2011

By Hand DelivelY

The Honorable Richard J. Holwell United States District Judge Southern District of New York 500 Pearl Street

New York, NY 10007

Re: United States v. Raj Rajaratnam, S2 09 Cr. 1184 (RJH)

Dear Judge Holwell:

The Government respectfully submits this letter in order to move to preclude the defendant from cross-examining a Government witness, Lloyd Blankfein, on (i) whether Goldman Sachs bears responsibility for the 2008 financial crisis, and (ii) whether Goldman Sachs is presently the subject of any pending investigations by either the Department of Justice ("DOJ") or the U.S. Securities and Exchange Commission (the "SEC"). The Government makes this application pursuant to Federal Rules of Evidence 402 and/or 403.

The Government intends to call Lloyd Blankfein, the CEO of Goldman Sachs, to testify on the subjects of Raj at Gupta's service on the Goldman Sachs Board of Directors, the duties of confidentiality that Gupta owed to Goldman Sachs, and certain confidential information that Gupta obtained through his service on Goldman's Board in 2008.

On March 7,2010, Raj Rajaratnam served a trial subpoena on Goldman Sachs requesting, among other things, "documents sufficient to show currently active investigations being conducted by" the DOJ, SEC and the U.S. Attorney's Office for the Southem District of New York that concern Goldman Sachs. A copy ofthis subpoena is attached hereto as Exhibit A. The Government's understanding is that Goldman Sachs conferred with Rajaratnam regarding the subpoena and responded by referring Rajaratnam to its Annual Report on Form 10- K for Fiscal Year Ended December 31, 2010, which was filed on February 28,2011. The relevant portions of this FOlID 10-K (pages 191-201) are attached hereto as Exhibit B.

The Form 10-K contains references to approximately 20 different "legal proceedings," among them "Financial Crisis-Related Matters," "Mortgage-Related Matters," and "Fannie Mae

Honorable Richard J. Holwell March 21, 2011

Page 2

Litigation." Importantly, not one of the 20 different legal proceedings concerns Raj Rajaratnam, the Galleon Group, or Rajat Gupta. Nor does the Form 10-K indicate that any of the various "legal proceedings" bears upon the credibility of Mr. Blankfein.

On March 20, 2011, Rajaratnam sent a letter to the Government (attached as Exhibit C) requesting the production of documents sufficient to identify all "open investigations" of Goldman Sachs by the DOJ or SEC. In furtherance of this request, Rajaratnam cites United States v. Chitty, 760 F.2d 425, 428 (2d Cir, 1985), a case in which prosecutors failed to notify the defense that one of the Government's witnesses had been notified that he was the target of an investigation by the United States Attorney's office. This case is wholly inapposite for the following reason: This Office has not notified Mr. Blankfein or Goldman Sachs that either is a target (or, for that matter, a subject) of any pending criminal investigation. There is simply no risk that Mr. Blankfein might alter his testimony to affect the outcome of an investigation since Goldman Sachs has received no such notification from this Office.

Pending Legal Proceedings. Second, this COUlt should preclude cross-examination of Mr, Blankfein on the various legal proceedings described in the Form 1O-K. Those proceedings are of no relevance to this matter, since those proceedings do not relate to Rajaratnam, Galleon, Gupta, or Mr. Blankfein's credibility. The only conceivable relevance would be general impeachment of Mr. Blankfein. Rajaratnam might suggest, for example, that because Goldman Sachs is tied up in many different legal proceedings, the film - and by extension its CEO, Mr. Blankfein - is not to be busted. But this claim is totally unfounded and would threaten confusion ofthe issues, since the legal proceedings described in the Form 10-K relate to the conduct of Goldman Sachs, and not Mr. Blankfein personally. Moreover, the Form 10-K states (at pg. 191) that "[m]any of these proceedings are at preliminary stages." The very fact that the proceedings are ongoing means that Goldman Sachs's conduct (or potential misconduct) is as yet undetermined,

Alternatively, Rajaratnam might attempt to imply that Mr. Blankfein is testifying in this matter in hopes of obtaining a better resolution of some separate, ongoing legal proceeding involving Goldman Sachs. There is absolutely no support for such a claim, it is entirely false, and the limited probative value of any cross-examination along these lines would be substantially outweighed by its prejudice. The Government has made no promise, explicit or implicit, direct or indirect, express or implied, that Mr. Blankfein or Goldman Sachs will receive anything at all in exchange for his testimony. Indeed, Mr. Blankfein has been subpoenaed to testify and is therefore legally required to appear. Mr. Blankfein's testimony is limited in scope. Were Mr. Blankfein's testimony regarding the actions of one Board member, Rajat Gupta, to become the vehicle through which he is called upon to answer questions regarding any number of unrelated pending proceedings, there would be a serious danger of prejudice and confusion.

Honorable Richard 1. Holwell March 21, 2011

Page 3

Goldman Sachs' Role in the 2008 Financial Crisis. Second, this Court should preclude the defendant from suggesting to the jury through questions or otherwise that Goldman Sachs or Mr. Blankfein was responsible for the 2008 financial crisis. Any such attempt to impeach Mr. Blankfein in this manner should be precluded pursuant to Federal Rules of Evidence 402 and 403. Whether Goldman Sachs played any role in that crisis is wholly irrelevant to Mr. Blankfein's testimony about Mr. Gupta. Moreover, even if such issues were somehow relevant, the probative value of such evidence is substantially outweighed by the danger of unfair prejudice. Many individuals, including, potentially, the jurors, have strong feelings about that crisis. It was for this very reason that defense counsel requested that the Government not put on evidence that Rajaratnam was in any way responsible for the crisis (and the Government agreed that it would not do so). Were defense counsel to suggest through crossexamination or otherwise that Mr. Blankfein or his firm was responsible for the fiscal crisis, there would be a risk of undue, unwarranted juror prejudice against Mr. Blankfein's testimony. Goldman Sachs is not on trial in this matter, The cross-examination of Mr. Blankfein is simply not the appropriate forum to delve into the highly complex causes of the 2008 financial crisis or the ensuing economic recession.

Respectfully submitted,

PREETBHARARA

United States Attorney for the Southern District of New York

by: ---",,--,{)(...___::_._iL_

JONATHAN STREETER REED BRODSKY

Assistant United States Attorneys ANDREW MICHAELSON

Special Assistant United States Attorney

cc (by email):

John M. Dowd, Esq. Terence 1. Lynam, Esq.

AO 89 (Rev. 08/09) Subpoena to Testify at a Hearing or Tria! in a Crimina! Case

UNITED STATES DISTRICT COURT

for the

Southern District of New York

United States of America

v.

RAJ RAJARA TNAM

) ) ) ) )

Case No. S2 09 Cr. 1184 (RJH)

Defendant

SUBPOENA TO TESTIFY AT A HEARING OR TRIAL IN A CRIMINAL CASE

To: The Goldman Sachs Group, Inc. clo Steve Peikin

Sulilvan & Cromwell, LLP

125 Broad Street New York, New York 10004-2498

YOU ARE COMMANDED to appear in the United States district court at the time, date, and place shown below to testify in this criminal case. When you arrive, you must remain at the court until the judge or a court officer allows you to leave.

Place of Appearance: United States District Court Courtroom No.: 178
Southern District of New York Date and Time:
500 Pearl Street 03/15/2011 9:00 am You must also bring with you the following documents, electronically stored information, or objects (blank ifnot applicable):

As described In the attached Exhibit A

(SEAL)

"

.. ~ }

S~ . .. .: '.' .'

Date:

.~~By~.~Jl~~C'

CLERlfOJ? C;OURT .

(,'1 ( : ... ,h)if.\~~ ,i

....._~ ~~;.>.: ~.

-~--, - S~'gnall/re cjClerk. or Deputy Clerk

...' ",0.)"."

, i ,

--------------------------------------------------~,-----~---------------------

The name, address) e-mail, and telephone number of the attorney representing (na/~~ of party)

_~~~~_~ > who requests this subpoena, are:

Raj Rajaratnam

John M. Dowd Odowd@akingump.com) Terence J. Lynam (tlynam@akingump.com) William E. White (wwhite@akingump.com) Akin Gump Strauss Hauer & Feld LLP

1333 New Hampshire Avenue N.W. Washington, DC 20036

202.887.4386

o I served the subpoena by delivering a copy to the named person as follows:

AO 89 (Rev. 08109) Subpoena to Testify at a Hearing or Trial in a Criminal Case (Page 2)

Case No. 8209 Cr. 1184 (RJH)

PROOF OF SERVICE

This subpoena for (name of individual and title, if any)

------------------------------------~~

was received by me on (date)

on (date)

----------------------------------------

; or

o I returned the subpoena unexecuted because:

My fees are $

for travel and $

for services. for a total of $

---------

0.00

Unless the subpoena was issued on behalf of the United States, or one of its officers or agents, I have also tendered to the witness fees for one day's attendance, and the mileage allowed by law, in the amount of

$

I declare under penalty of perjury that this information is true.

Server's address

Date:

Server's signature

Printed name and title

Additional information regarding attempted service, etc:

.1

i

I

'[ EXHIBIT A

RULES OF CONSTRUCTION

1. Any term that references a corporation, partnership. proprietorship, association, organization, governmental entity, group of Persons, or any other business or legal entity shall be deemed to include reference to its agents, accountants, advisors; employees, attorneys, officers, directors, direct or indirect shareholders, members, representatives, affiliates, subsidiaries, predecessors, successors, assigns, or any other Person acting or purporting to act on its behalf.

2. The terms (a) "and" and "or" shall be construed either disjunctively or conjunctively as necessary to bring within the scope of the discovery request all responses that might otherwise be construed to be outside of its scope; and (b) "each" and "all" shall be construed as all and each.

3. The use of (a) any singular noun shall be construed to include the plural, and vice versa, and (b) a verb in any tense shall be construed as the use of the verb in all other tenses.

DEFINITIONS

1. "Communication" means the transmittal of information (in the form of facts, ideas, inquiries or otherwise).

2. "Document" means every writing or record of whatever type and description in the possession, custody or control of the Company or any of its directors, officers, employees, or agents, however made, and includes all handwritten. typed, printed, recorded, transcribed, taped, filmed, graphic or sound reproduction material, magnetic cards or cartridges, optical storage devices, and computer records, printouts, runs, cards, tapes, or disks (together with all programming instructions and other material necessary for their use). "Document" includes every copy of every document where such copy is not identical to the original because of any addition, deletion, alteration, or notation. "Document" specifically includes, but is not limited to, electronic mail, handwritten notes; statements or charts of organization; telephone and personnel directories; press releases; announcements; notices; statements of procedure and policy; biographies and personnel files; individual appointment calendars and schedules; card files; diaries; calendar and diary entries; telephone logs; routing slips; records or evidence of incoming and outgoing telephone calls; itineraries; activity reports; travel vouchers and accounting; bank records; accounting and bookkeeping records and materials; financial records and statements; external or internal correspondence; cables; telexes; teletypes; telegrams; telecopies; labeling; photographs; slides; verbal or written communications; word processing system memory in any form; guidelines; standards; memoranda; letters; messages; reports; plans; forecasts; summaries; briefing materials; studies; notes; working papers; graphs; maps; charts; diagrams; agendas; minutes; transcripts, records, or summaries of any meeting, conversation, conference or communication; and all attachments to any of the items set forth in this paragraph.

1

3. "Identify' (with respect to persons). When referring to a person, "to identify" means to give, to the extent known; the person's full name, present or last known address, and

when referring to a natural person, additionally, the present or last known place of employment. Once a person has been identified in accordance with this subparagraph, only the name of that person need be listed in response to subsequent discovery requesting the identification of that person.

4. "Identify" (with respect to documents). "When referring to documents, "to identify" means to give, to the extent known, the (i) type of document; (ii) general subject matter; (iii) date of the document; and (iv) authorfs), addressee(s) and recipient(s).

5. "Parties." With respect to "parties," the term "defendant" as well as a party's full or abbreviated name or a pronoun referring to a party mean the party and, where applicable, its officers, directors, employees, partners, corporate parent, subsidiaries or affiliates. This definition is not intended to impose a discovery obligation on any person who is not a party to the litigation.

6. "Person" is defined as any natural person or any business, legal or governmental entity or association.

7. "Concerning" means relating to, referring to, describing, evidencing or constituting.

8. "You" or "Your" Of "Goldman Sachs" shall mean The Goldman Sachs Group, Inc., their subsidiaries, affiliates, and joint ventures, and any and all of their predecessors, successors, and assigns, and all such entities' past or present officers, employees, directors, partners, members; managers, representatives, attorneys, or agents.

9. "Galleon" is the Galleon Group of hedge funds, Galleon Management, LP, and any affiliated entity.

10, "Berkshire Hathaway" shall mean Berkshire Hathaway Inc., their subsidiaries, affiliates, and joint ventures, and any and all of their predecessors, successors, and assigns, and all such entities' past or present officers, employees, directors, partners, members, managers, representatives, attorneys, or agents.

11. "SEC," "DOJ," and "FBI," shall mean, respectively, the United States Securities and Exchange Commission, the United States Department of Justice, and the Federal Bureau oflnvestigation, including but not limited to any of their divisions, subdivisions, officers, directors, representatives, trustees, agents, employees, affiliates; predecessors, or successors.

12. "Security" or "securities" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profitsharing agreement, collateral trust certificate, pre-organization certificate or SUbscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, any put, call, straddle, option, or any privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or in general any interest or instrument commonly known as a "security," or any certificate of interest or participation in,

2

temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe or purchase, any of the foregoing.

13. "Earnings" means earnings, revenues, guidance, margins, sales, orders, or other financial information regularly compiled and reported on a quarterly and/or annual basis to shareholders, the SEC, or other regulatory or self-regulatory entity.

14, "NASDAQ," "NASD," "NYSE," and "FINRA" shall mean, respectively, the NASDAQ Stock Market, the National Associate of Securities Dealers, the New York Stock Exchange, and the Financial Industry Regulatory Authority, their subsidiaries, affiliates, and joint ventures, and any and all of their predecessors, successors, and assigns, and all such entities' past or present officers, employees, directors, partners, members, managers, representatives, or agents,

INSTRUCTIONS

1. These requests for production apply to all information in your possession, custody, or control, including information to which you have access or the reasonable ability to obtain.

2, All documents and tangible things are to be produced in their original file folders, file jackets, envelopes, or covers, or an accurate reproduction thereof,

3. Should a claim be made that any requested document or tangible thing is not subject to discovery by reason of privilege or otherwise, you are requested to identify separately each document or thing for which such a privilege is claimed, the particular request to which such a document or thing is responsive, and a statement of the basis on which the document is withheld sufficient to assess the claim of privilege,

4. As to any document or thing previously destroyed, specify the author thereof, its date, its content, the identity of persons who received copies, and when and under what circumstances the document was destroyed.

5, The Relevant Time Period for these document requests, unless otherwise specified, shall be from April 1, 2008 to December 31, 2008.

6. Each request seeks production of all documents and things described along with any attachments, drafts, or non-identical copies.

7. All electronic documents, including but not limited to emails, shall be produced in native format.

8. If any portion of any document is responsive, the entire document shall be produced. If only part of a document is protected by any privilege, the document shall be produced with only the privileged matter redacted.

9. Documents shall be produced in the order in which they are ordinarily kept and shall not be rearranged in any way,

3

DOCUMENT REQUESTS

1. Minutes of meetings of the Goldman Sachs board of directors or of any sub-group thereof that occurred on July 17,2008 and/or October 23,2008.

2. Documents or other materials distributed to Goldman Sachs board members before or during meetings that occurred on July 17,2008 and/or October 23, 2008.

3. Interview memoranda or notes of interviews of Raj at K. Gupta, Lloyd C. Blankfein, Gary D. Cohn, and David A. Viniar related to any investigation by Goldman Sachs concerning the disclosure of non-public information to Raj Rajaratnam.

4. Documents sufficient to show currently active investigations being conducted by the United States Securities and Exchange Commission that concern Goldman Sachs,

5. Documents sufficient to show currently active investigations being conducted by the Office of the United States Attorney for the Southern District of New York that concern Goldman Sachs.

6. Documents sufficient to show currently active investigations being conducted by the United States Department of Justice (except those in the Southern District of New York) that concern Goldman Sachs.

4

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

(I.R.S. Employer Identification No.)

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-14965

For the fiscal year ended December 31,2010

The Goldman Sachs Group, Inc.

(Exact name of registrant as specified In Its charter)

Delaware 13·4019460

(State or other jurisdiction of incorporation or organization)

200 West Street New York, N.Y.

(Address of principal executive offices)

10282 (Zip Code)

(212) 902·1000

(Registrant's telephone number, Including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Common stock, par value $.01 per share

Depositary Shares, Each Representing 1/1,OOOth Interest In a Share of Floating Rate Non-Cumulative Preferred Stock, Series A

Depositary Shares, Each Representing 1/1,OOOlh Interest In a Share of 6.20% Non·Cumulatlve Preferred Stock, SerIes B

Depositary Shares, Each Representing 1/1,00Oth Interest In a Share of Floating Rate Non-Cumulative Preferred Stock, Series C

Depositary Shares, Each Representing 1/1,000lh Interest In a Share of Floating Rate Non-Cumulative Preferred Stock, Series D

5.793% Flxed·to-Floatlng Rate Normal Automatic Preferred Enhanced Capital Securities of Goldman Sachs Capital II (and Registrant's guarantee with respect thereto)

Floating Rate Normal Automatic Preferred Enhanced Capital Securilles of Goldman Sachs Capital III (and Registrant's guarantee with "respect thereto)

Medlum·Term Notes, Series B, Index-LInked Notes due February 2013; Index-Linked Notes due April 2013; Index-LInked Notes due May 2013; and Index-Linked Notes due 2011 Medium-Term Notes, Series B, Floating Rate Notes due 2011

Medium-Term Notes, Series A, Index-LInked Notes due 2037 of GS Finance Corp. (and Registrant's guarantee with respect thereto)

Medium-Term Notes, Series B, Index-LInked Notes due 2037

Medium-Term Notes, Series D, 7.50% Notes due 2019

6.125% Notes due 2060

Name of each exchange on which registered:

New York Stock Exchange New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

NYSE Amex

New York Stock Exchange NYSE Arca

NYSE Arca

New York Stock Exchange New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark If the registrant Is a well-known seasoned issuer, as defined in Rule 405 of the Securttles Act.

Yes [81 No 0

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes 0 No [81

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securltles Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [81 No 0

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required 10 be submitted and posted pursuant to Rule 405 of Regulation S- T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [81 No 0

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not conlained herein, and will not be contained, to the best of registrant's knowledge, In definitive proxy or information statements incorporated by reference in Part Ul of the Annual Report on Form 10-K or any amendment to the Annual Report on Form 10-K. [81

I ndlcate by check mark whether th e registrant Is a large acce Ie rated filer, an accel erated filer, a n en-aces lerated filer, or a smaller reporting co mpany. See

the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" In Rule 12b-2 of the Exchange Act.

Large accelerated filer 181 Accelerated lifer 0 Non-accelerated filer (00 not check if a smaller reporling company) 0 Smaller reporting company 0 Indicate by check mark whelher the registrant is a shell company (as defined In Rule 12b-2 of the Exchange Act). Yes 0 No [5IJ

As of June 30, 2010, the aggregate market value of the common stock of the registrant held by non-affiliates of the registrant was approximately $66.7 billion.

As of February 11 , 2011, there were 520,507,295 shares of the registrant's common stock outstanding.

Documents incorporated by reference: Portions of The Goldman Sachs Group, Inc.'s Proxy Statement for its 2011 Annual Meeting of Shareholders to be held on May 6, 2011 are incorporated by reference in the Annual Report on Form 10-K in response to Part lll, Items 10, 11, 12, 13 and 14.

THE GOLDMAN SACHS GROUP, INC.

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010 INDEX

Form 10-K Item Number Page No .

...................................... H •••• ".,'<, .•.• , •.•. , H H H LL" •• LL •••••••••••••••••••••••

PART I 1

Item 1 Business 1

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Introduction 1

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Institutional Client Services 3

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Available Information 17

Cautionary Statement Pursuant to the U,S. Private Securities Litigation Reform Act of

1995 17

Item 1 A Risk Factors 18

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Item 1 B Unresolved Staff Comments 31

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PART II 34

Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer

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Item 6 Selected Financial Data 34

Item 7 Management's Discussion and Analysis of Financial Condition and Results of

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Item 7A Quantitative and Qualitative Disclosures About Market Risk 96

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Item 9 Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure 213

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Item 9A Controls and Procedures 213

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Item 9B Other Information 213

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PART III 213

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Item 12 Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters 214

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PART IV 215

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Item 15 Exhibits and Financial Statement Schedules 215

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SIGNATURES 11-1

IPO Process Matters. Group Inc. and GS&Co. are among the numerous financial services companies that have been named as defendants in a variety of lawsuits alleging improprieties in the process by which those companies participated In the underwriting of public offerings in recent years.

GS&Co. has, together with other underwriters in certain offerings as well as the issuers and certain of their officers and directors, been named as a defendant in a number of related lawsuits filed in the U.S. District Court for the Southern District of New York alleging, among other things, that the prospectuses for the offerings violated the federal securities laws by failing to disclose the existence of alleged arrangements tying allocations in certain offerings to higher customer brokerage commission rates as well as purchase orders in the aftermarket, and that the alleged arrangements resulted in market manipulation. On October 5, 2009, the district court approved a settlement agreement entered into by the parties. The firm has paid into a settlement fund the full amount that GS&Co. would contribute in the proposed settlement. On October 23, 2009, certain objectors filed a petition in the U.S. Court of Appeals for the Second Circuit seeking review of the district court's certification of a class for purposes of the settlement, and various objectors appealed certain aspects of the settlement's approval. Certain of the appeals have been withdrawn, and on December 8, 2010, January 14, 2011 and February 3, 2011, plaintiffs moved to dismiss the remaining appeals.

GS&Co. is among numerous underwriting firms named as defendants in a number of complaints filed commencing October 3, 2007, in the U.S. District Court for the Western District of Washington alleging violations of Section 16 of the Exchange Act in connection with offerings of securities for 15 issuers during 1999 and 2000. The complaints generally assert that the underwriters, together with each issuer's directors, officers and principal shareholders, entered into purported agreements to tie allocations In the offerings to increased brokerage commissions and aftermarket purchase orders. The complaints further allege that, based upon these and other purported agreements, the underwriters violated the reporting provisions of, and are subject to short-swing profit recovery under, Section 16 of the Exchange Act. The district court granted defendants' motions to dismiss by a decision dated March 12, 2009. On December 2, 2010,the appellate court affirmed in part and reversed in part, upholding the dismissal of

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Note 30. Legal Proceedings

The firm is involved in a number of judicial, regulatory and arbitration proceedings (including those described below) concerning matters arising in connection with the conduct of the firm's businesses. Many of these proceedings are at preliminary stages, and many of these cases seek an indeterminate amount of damages.

With respect to matters described below, management has estimated the upper end of the range of reasonably possible loss as being equal to (l) the amount of money damages claimed, where applicable, (Ii) the amount of securities that the firm sold in cases involving underwritings where the firm is being sued by purchasers and is not being indemnified by a party that the firm believes will pay any judgment, or (Iii) In cases where the purchasers are demanding that the firm repurchase securities, the price that purchasers paid for the securities less the estimated value, if any, as of December 2010 of the relevant securities. As of December 2010, the firm has estimated the aggregate amount of reasonably possible losses for these matters to be approximately $3.4 billion.

Under ASC 450 an event is "reasonably possible" if ''the chance of the future event or events occurring Is more than remote but less than likely" and an event is "remote" if "the chance of the future event or events occurring is slight". Thus, references to the upper end of the range of reasonably possible loss for cases in which the firm is able to estimate a range of reasonably possible loss mean the upper end of the range of loss for cases for which the firm believes the risk of loss is more than slight. The amounts reserved against such matters are not significant as compared to the upper end of the range of reasonably possible loss.

Management is unable to estimate a range of reasonably possible loss for cases described below in which damages have not been specified and (1) the proceedings are in early stages, (ii) there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class, (iii) there is uncertainty as to the outcome of pending appeals or motions, (iv) there are significant factual issues to be resolved, and/or (v) there are novel legal issues presented. However, for these cases, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material adverse effect on the firm's financial condition, though the outcomes could be material to the firm's operating results for any particular period, depending, in part, upon the operating results for such period.

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the offering materials and that the market was artificially inflated by improper public statements and stabilization activities. Goldman Sachs and ABN AMRO Rothschild served as joint global coordinators of the approximately €2.9 billion offering. GSI underwrote 20,268,846 shares and GS&Co. underwrote 6,756,282 shares for a total offering price of approximately €1.16 billion.

The district court rejected the claims against GSI and ABN AMRO, but found World Online liable in an amount to be determined. On appeal, the Netherlands Court of Appeals affirmed in part and reversed in part the decision of the district court holding that certain of the alleged disclosure deficiencies were actionable as to GSI and ABN AMRO. On further appeal, the Netherlands Supreme Court on November 27, 2009 affirmed the rulings of the Court of Appeals, except found certain additional aspects of the offering materials actionable and held that GSI and ABN AMRO could potentially be held responsible for certain public statements and press releases by World Online and its former CEO. On November 18, 2010, the parties reached a settlement in principle, subject to documentation, pursuant to which GSI will contribute .up to €48 million to a settlement fund. The firm has reserved the full amount of GSI's proposed contribution to the settlement.

Research Matters. GS&Co. is one of several investment firms that have been named as defendants in substantively identical purported class actions filed in the U.S. District Court for the Southern District of New York alleging violations of the federal securities laws in connection with research coverage of certain issuers and seeking compensatory damages. One such action, relating to coverage of RSL Communications, lnc., commenced on July 15, 2003. The parties entered into a settlement agreement on August 23, 2010, which received final court approval on February 23, 2011. Under the settlement agreement, GS&Co. paid approximately $3.38 million.

Group Inc. and GS&Co. were named as defendants in a purported class action filed on July 18, 2003 on behalf of purchasers of Group Inc. stock from July 1, 1999 through May 7, 2002. The complaint in the U.S. District Court for the Southern District of New York, alleged that defendants breached their fiduciary duties and violated the federal securities laws in connection with the firm's research activities and sought, among other things, unspecified compensatory damages and/or rescission. On July 12, 2010, the parties entered into a settlement agreement pursuant to which the settlement has

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seven of the actions in which GS&Co. is a defendant but remanding the remaining eight actions in which GS&Co. is a defendant for consideration of other bases for dismissal. On December 16, 2010, the underwriters and the plaintiff filed petitions for rehearing and/or rehearing en banc, which were denied on January 18, 2011. The issuance of the mandate has been stayed to permit the parties to seek Supreme Court review.

GS&Co. has been named as a defendant in an action commenced on May 15, 2002 in New York Supreme Court, New York County, by an official committee of unsecured creditors on behalf of eToys, Inc., alleging that the firm intentionally underpriced eToys, Inc.'s initial public offering. The action seeks, among other things, unspecified compensatory damages resulting from the alleged lower amount of offering proceeds. The court granted GS&Co.'s motion to dismiss as to five of the claims; plaintiff appealed from the dismissal of the five claims, and GS&Co. appealed from the denial of its motion as to the remaining claim. The New York Appellate Division, First Department affirmed in part and reversed in part the lower court's ruling on the firm's motion to dismiss, permitting all claims to proceed except the claim for fraud, as to which the appellate court granted leave to replead, and the New York Court of Appeals affirmed in part and reversed in part, dismissing claims for breach of contract, professional malpractice and unjust enrichment, but permitting claims for breach of fiduciary duty and fraud to continue. On remand to the lower court, GS&Co. moved to dismiss the surviving claims or, in the alternative, for summary judgment, but the motion was denied by a decision dated March 21, 2006, and the court subsequently permitted plaintiff to amend the complaint again. On November 8, 2010, GS&Co.'s motion for summary judgment was granted by the lower court; plaintiff has appealed.

Group Inc. and certain of its affiliates have, together with various underwriters in certain offerings, received subpoenas and requests for documents and information from various governmental agencies and self-regulatory organizations in connection with investigations relating to the public offering process. Goldman Sachs has cooperated with these investigations.

World Online Litigation. In March 2001, a Dutch shareholders association initiated legal proceedings for an unspecified amount of damages against GSI and others in Amsterdam District Court In connection with the initial public offering of World Online in March 2000, alleging misstatements and omissions in

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On March 30, 2004, certain specialist firms on the NYSE, including SLKS, without admitting or denying the allegations, entered into a final global settlement with the SEC and the NYSE covering certain activities during the years 1999 through 2003. The SLKS settlement involves, among other things, (I) findings by the SEC and the NYSE that SLKS violated certain federal securities laws and NYSE rules, and in some cases failed to supervise certain individual specialists, in connection with trades that allegedly disadvantaged customer orders, (ii) a cease and desist order against SLKS, (iii) a censure of SLKS, (lv) SLKS' agreement to pay an aggregate of $45.3 million in disgorgement and a penalty to be used to compensate customers, (v) certain undertakings with respect to SLKS' systems and procedures, and (vi) SLKS' retention of an independent consultant to review and evaluate certain of SLKS' compliance systems, policies and procedures. Comparable findings were made and sanctions imposed in the settlements with other specialist firms. The settlement did not resolve the related private civil actions against SLKS and other firms or regulatory investigations involving individuals or conduct on other exchanges.

SLKS, Spear, Leeds & Kellogg, LP. and Group Inc. are among numerous defendants named in purported class actions brought beginning in October 2003 on behalf of investors in the U.S. District Court for the Southern District of New York alleging violations of the federal securities laws and state common law in connection with NYSE floor specialist activities. The actions, which have been consolidated, seek unspecified compensatory damages, restitution and disgorgement on behalf of purchasers and sellers of unspecified

securities between October 17, 1998 and

October 15, 2003. By a decision dated

March 14, 2009, the district court granted plaintiffs' motion for class certification. The defendants' petition with the U.S. Court of Appeals for the Second Circuit seeking review of the certification ruling was denied by an order dated October 1, 2009. The specialist defendants' petition for a rehearing and/or rehearing en banc was denied on February 24, 2010.

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been funded by the firm's insurers. The settlement received court approval on December 15, 2010 and has become final.

Group Inc. and certain of its affiliates are subject to a number of investigations and reviews by various governmental and regulatory bodies and self-regulatory organizations relating to research practices, including communications among research analysts, sales and trading personnel and clients. Goldman Sachs is cooperating with the investigations and reviews.

Adelphia Communications Fraudulent Conveyance Litigation. GS&Co. is among numerous entities named as defendants in two adversary proceedings commenced in the U.S. Bankruptcy Court for the Southern District of New York, one on July 6, 2003 by a creditors committee, and the second on or about July 31, 2003 by an equity committee of Adelphia Communications, Inc. Those proceedings have now been consolidated in a single amended complaint filed by the Adelphia Recovery Trust on October 31, 2007. The complaint seeks, among other things, to recover, as fraudulent conveyances, payments made allegedly by Adelphia Communications, Inc. and its affiliates to certain brokerage firms, including approximately $62.9 million allegedly paid to GS&Co., in respect of margin calls made in the ordinary course of business on accounts owned by members of the family that formerly controlled Adelphia Communications, Inc. By a decision dated June 15, 2009, the district court required plaintiff to amend its complaint to specify the source of the margin payments to GS&Co. By a decision dated July 30, 2009, the district court held that the sufficiency of the amended claim would be determined at the summary judgment stage. On March 2, 2010, GS&Co. moved for summary judgment.

Specialist Matters. Spear, Leeds & Kellogg Specialists LLC (SLKS) and certain affiliates have received requests for information from various governmental agencies and self-regulatory organizations as part of an industry-wide investigation relating to activities of floor specialists in recent years. Goldman Sachs has cooperated with the requests.

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Refco Securities Litigation. GS&Co. and the other lead underwriters for the August 2005 initial public offering of 26.5 million shares of common stock of Refco Inc. are among the defendants in various putative class actions filed in the U.S. District Court for the Southern District of New York beginning in October 2005 by investors in Refco Inc. in response to cerlain publicly reported events that culminated in the October 17, 2005 filing by Refco Inc. and certain affiliates for protection under U.S. bankruptcy laws. The actions, which have been consolidated, allege violations of the disclosure requirements of the federal securities laws and seek compensatory damages. In addition to the underwriters, the consolidated complaint names as defendants Refco Inc. and certain of its affiliates, certain officers and directors of Refco Inc., Thomas H. Lee Partners, L.P. (which held a majority of Refco lnc.s equity through certain funds it manages), Grant Thornton (Retco Inc.'s outside auditor), and BAWAG P.S.K. Bankfur Arbeit und Wirtschaft und Osterreichische Postsparkasse Aktiengesellschaft (BAWAG). Lead plaintiffs entered into a settlement with BAWAG, which was approved following certain amendments on June 29, 2007. GS&Co. underwrote 5,639,200 shares of common stock at a price of $22 per share for a total offering price of approximately $124 million. On April 20, 2010, certain underwriting defendants including GS&Co. entered into a settlement of the action, pursuant to which they will contribute $49.5 million to a settlement fund. The settlement received court approval on October 27,2010 and has become final.

GS&Co. has, together with other underwriters of the Refco Inc. initial public offering, received requests for information from various governmental agencies and self-regulatory organizations. GS&Co. has cooperated with those requests.

Fannie Mae Litigation. GS&Co. was added as a defendant in an amended complaint filed on August 14, 2006 in a purported class action pending in the U.S. District Court torihe District of Columbia. The complaint asserts violations of the federal securities laws generally arising from allegations concerning Fannie Mae's accounting practices in connection with certain Fannie Mae-sponsored REMIC transactions that were allegedly arranged by GS&Co. The complaint does not specify a dollar amount of damages. The other defendants include Fannie Mae, certain of its past and present officers and directors, and accountants. By a decision dated May 8, 2007, the

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Treasury Matters. GS&Co. has been named as a defendant in a purported class action filed on March 10, 2004 in the U.S. District Court for the Northern District of Illinois on behalf of holders of short positions in so-year U.S. Treasury futures and options on the morning of October 31, 2001. The complaint alleges that the firm purchased 30-year bonds and futures prior to a forthcoming Treasury refunding announcement that morning based on non-public information about that announcement, and that such purchases increased the costs of covering such short poslttons. The complaint also names as defendants the, Washington, D.C.-based political consultant who allegedly was the source of the information, a former GS&Co. economist who allegedly received the information, and another company and one of its employees who also allegedly received and traded on the information prior to its public announcement. The complaint alleges violations of the federal commodities and antitrust laws, as well as Illinois statutory and common law, and seeks, among other things, unspecified damages including treble damages under the antitrust laws. The district court dismissed the antitrust and Illinois state law claims but permitted the federal commodities law claims to proceed. Plaintiff's motion for class certification was denied by a decision dated August 22, 2008. GS&Co. moved for summary judgment, and the district court granted the motion but only insofar as the claim relates to the trading of treasury bonds. On October 13, 2009, the parties filed an offer of judgment and notice of acceptance with respect to plaintiff's individual claim. On December 11, 2009, the plaintiff purported to appeal with respect to the district court's prior denial of class certification, and GS&Co. moved to dismiss the appeal on January 25, 2010. By an order dated April 13, 2010, the U.S. Court of Appeals for the Seventh Circuit ruled that GS&Co:s motion would be entertained together with the merits of the appeal.

Mutual Fund Matters. GS&Co. and certain mutual fund affiliates have received subpoenas and requests for information from various governmental agencies and self-regulatory organizations including the SEC as part of the industry-wide investigation relating to the practices of mutual funds and their customers. GS&Co. and its affiliates have cooperated with such requests.

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amended complaint, which added purported direct (l.e., non-derivative) claims based on substantially the same theory. The plaintiff filed a further amended complaint on March 24, 2010, and the defendants' motion to dismiss this further amended complaint was granted on September 30, 2010. On October 22, 2010, the plaintiff filed a notice of appeal from the dismissal of his complaint.

On March 24, 2009, the same plaintiff filed an action in New York Supreme Court, New York County against Group lnc., its directors and certain senior executives alleging violation of Delaware statutory and common law in connection with substantively similar allegations regarding stock option awards. On April 14, 2009, Group Inc. removed the action to the U.S. District Court for the Southern District of New York and has moved to transfer to the district court judge presiding over the other actions described in this section and to dismiss. The action was transferred on consent to the U.S. District Court for the Eastern District of New York, where defendants moved to dismiss on April 23, 2009. On July 10, 2009, plaintiff moved to remand the action to state court, and this motion was granted on July 29, 2010. On January 7, 2011, the plaintiff filed an amended complaint.

Purported shareholder derivative actions have been commenced in New York Supreme Court, New York County and Delaware Court of Chancery beginning on December 14, 2009, alleging that the Board breached its fiduciary duties in connection with setting compensation levels for the year 2009 and that such levels are excessive. The complaints name as defendants Group lnc., the Board and certain senior executives. The complaints seek, inter eue, unspecified damages, restitution of certain compensation paid, and an order requiring the firm to adopt corporate reforms. In the actions in New York state court, on April 8, 2010, the plaintiffs filed a motion indicating that they no longer intend to pursue their claims but are seeking an award of attorney's fees in connection with bringing the suit, which the defendants have opposed. In the actions brought in the Delaware Court of Chancery, the defendants moved to dismiss on March 9, 2010, and the plaintiffs amended their complaint on April 28, 2010 to Include, among other things, the allegations included in the SEC's action described in the "Mortgage-Related Matters" section below. The defendants moved to dismiss this amended complaint on May 12, 2010. In lieu of responding to defendants' motion, plaintiffs moved on December 8, 2010 for permission to file a further

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district court granted GS&Co.'s motion to dismiss the claim against it. The time for an appeal will not begin to run until disposition of the claims against other defendants.

Beginning in September 2006, Group Inc. and/or GS&Co. were named as defendants in four Fannie Mae shareholder derivative actions in the U.S. District Court for the District of Columbia. The complaints generally allege that the Goldman Sachs defendants aided and abetted a breach of fiduciary duty by Fannie Mae's directors and officers in connection with certain Fannie Mae-sponsored REMIC transactions and one of the complaints also asserts a breach of contract claim. The complaints also name as defendants certain former officers and directors of Fannie Mae as well as an outside accounting firm. The complaints seek, inter alia, unspecified damages. The Goldman Sachs defendants were dismissed without prejudice from the first filed of these actions, and the remaining claims in that action were dismissed for failure to make a demand on Fannie Mae's board of directors. That dismissal has been affirmed on appeal. The district court dismissed the remaining three actions on July 28, 2010. The plaintiffs filed motions for reconsideration, which were denied on October 22, 2010, and have revised their notices of appeal in these actions.

Compensation-Related Litigation. On January 17, 2008, Group Inc., its Board, executive officers and members of its management committee were named as defendants in a purported shareholder derivative action in the U.S. District Court for the Eastern District of New York predicting that the firm's 2008 Proxy Statement will violate the federal securities laws by undervaluing certain stock option awards and alleging that senior management received excessive compensatlon for 2007. The complaint seeks, among other things, an Injunction against the distribution of the 2008 Proxy Statement, the voiding of any election of directors in the absence of an injunction and an equitable accounting for the allegedly excessive compensation. On January 25, 2008, the plaintiff moved for a preliminary injunction to prevent the 2008 Proxy Statement from using options valuations that the plaintiff alleges are incorrect and to require the amendment of SEC Form 4s filed by certain of the executive officers named in the complaint to reflect the stock option valuations alleged by the plaintiff. Plaintiff's motion for a preliminary injunction was denied, and plaintiff's appeal from this denial was dismissed. On February 13, 2009, the plaintiff filed an

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amended complaint, which the defendants had opposed. The court granted plaintiffs' motion to amend on January 19, 2011, and the defendants moved to dismiss the second amended complaint on February 4, 2011.

Group Inc. and certain of its affiliates are subject to a number of Investigations and reviews from various governmental agencies and self-regulatory organizations regarding the firm's compensation processes. The firm is cooperating with the investigations and reviews.

Mortgage-Related Matters. On April 16, 2010, the SEC brought an action (SEC Action) under the U.S. federal securities laws in the U.S. District Court for the Southern District of New York against GS&Co. and Fabrice Tourre, one of its employees, in connection with a COO offering made in early 2007 (ABACUS 2007-AC1 transaction), alleging that the defendants made materially false and misleading statements to investors and seeking, among other things, unspecified monetary penalties. Investigations of GS&Co. by FINRA and of GSI by the U.K. Financial Services Authority (FSA) were subsequently initiated, and Group Inc. and certain of its affiliates have received requests for information from other regulators, regarding COO offerings, including the ABACUS 2007-AC1 transaction, and related matters.

On July 14, 2010, GS&Co. entered into a consent agreement with the SEC, settling all claims made against GS&Co. in the SEC Action (SEC Settlement), pursuant to which, GS&Co. paid $550 million of disgorgement and civil penalties, and which was approved by the U.S. District Court for the Southern District of New York on July 20, 2010.

On September 9, 2010, the FSA announced a settlement with GSI pursuant to which the FSA found that GSI violated certain FSA principles by falling to (i) provide notification about the SEC Wells Notice issued to Mr. Tourre (who worked on the ABACUS 2007-AC1 transaction but subsequently transferred to GSI and became registered with the FSA) and (11) have procedures and controls to ensure that GSJ's Compliance Department would be alerted to various aspects of the SEC investigation so as to be in a position to determine whether any aspects were reportable to the FSA. The FSA assessed a fine of £17.5 million.

On November 9, 2010, FINRA announced a settlement with GS&Co. relating to GS&Co.'s failure to file Form U4 updates within 30 days of learning of the receipt of Wells

Notices by Mr. Tourre and another employee as well as deficiencies in the firm's systems and controls for such filings. FINRA assessed a fine of $650,000 and GS&Co. agreed to undertake a review and remediation of the applicable systems and controls.

On January 6, 2011, ACA Financial Guaranty Corp. filed an action against GS&Co. in respect of the ABACUS 2007-AC1 transaction in New York Supreme Court, New York County. The complaint includes allegations of fraudulent inducement, fraudulent concealment and unjust enrichment and seeks at least $30 million in compensatory damages, at least $90 million In punitive damages and unspecified d isgorg ement.

Since April 22, 2010, a number of putative shareholder derivative actions have been filed in New York Supreme Court, New York County, and the U.S. District Court for the Southern District of New York against Group Inc., the Board and certain officers and employees of Group Inc. and its affiliates In connection with mortgage-related matters between 2004 and 2007, including the ABACUS 2007-AC1 transaction and other COO offerings. These derivative complaints generally include allegations of breach of fiduciary duty, corporate waste, abuse of control, mismanagement, unjust enrichment, misappropriation of information, securities fraud and insider trading, and challenge the accuracy and adequacy of Group Inc.'s disclosure. These derivative complaints seek, among other things, declaratory relief, unspecified compensatory damages, restitution and certain corporate governance reforms. The New York Supreme Court has consolidated the two actions pending in that court. Certain plaintiffs in the federal court cases have moved to consolidate these actions and to appoint lead plaintiff and lead counsel. In addition, as described in the "Compensation-Related Litigation" section above, the plaintiffs in the compensation-related Delaware Court of Chancery actions have amended their complaint to assert, among other things, allegations similar to those in the derivative claims referred to above, the defendants moved to dismiss this amended complaint, and the plaintiffs then sought permission to amend further, which the court granted on January 19, 2011. The defendants moved to dismiss the second amended complaint on February 4, 2011.

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to the plaintiff's Section 12(a)(2) claims on September 22, 2010, and granted as to the plaintiff's Section 11 claims on October 15, 2010, and the plaintiff's motion for reconsideration was denied on November 17, 2010. On December 9, 2010, the plaintlff filed a motion for entry of final judgment or certification of an interlocutory appeal as to plaintiff's Section 11 claims, which was denied on January 11, 2011. On June 3, 2010, another investor (who had unsuccessfully sought to intervene in the action) filed a separate putative class action asserting substantively similar allegations relating to an additional offering pursuant to the 2007 registration statement. The defendants moved to dismiss this separate action on November 1, 2010. GS&Co. underwrote approximately $951 million principal amount of certificates to all purchasers in the offerings at issue in the complaint (excluding those offerings for which the claims have been dismissed).

Group Inc., GS&Co., Goldman Sachs Mortgage Company and GS Mortgage Securities Corp. are among the defendants in a separate putative class action commenced on February 6, 2009 in the U.S. District Court for the Southern District of New York brought on behalf of purchasers of various mortgage pass-through certificates and asset-backed certificates issued by various securitization trusts in 2006 and underwritten by GS&Co. The other defendants include three current or former Goldman Sachs employees and various rating agencies. The second amended complaint generally alleges that the registration statement and prospectus supplements for the certificates vIolated the federal securities laws, and seeks unspecified compensatory and rescissionary damages. Defendants moved to dismiss the second amended complaint. On January 12, 2011, the district court granted the motion to dismiss with respect to offerings in which plaintiff had not purchased securities, but denied the motion to dismiss with respect to a single offering in which the plaintiff allegedly purchased securities. GS&Co. underwrote approximately $698 million principal amount of certificates to all purchasers in the offerings at issue in the complaint (excluding those offerings for which the claims have been dismissed).

On September 30, 2010, a putative class action was filed in the U.S. District Court for the Southern District of New York against GS&Co., Group Inc. and two former GS&Co. employees on behalf of investors in notes issued in 2006 and 2007 by two synthetic COOs (Hudson Mezzanine 2006-1 and 2006-2). The

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Since April 23, 2010, the Board has received letters from shareholders demanding that the Board take action to address alleged misconduct by GS&Co., the Board and certain officers and employees of Group Inc. and its affiliates. The demands generally allege misconduct in connection with the ABACUS 2007-AC1 transaction, the alleged failure by Group Inc. to adequately disclose the SEC investigation that led to the SEC Action, and Group Inc.'s 2009 compensation practices. The demands include a letter from a Group Inc. shareholder, which previously made a demand that the Board investigate and take action in connection with auction products matters, and has now expanded its demand to address the foregoing matters. The Board previously rejected the demands relating to auction products matters.

In addition, beginning April 26, 2010, a number of purported securities law class actions have been filed in the U.S. District Court for the Southern District of New York challenging the adequacy of Group lnc.s public disclosure of, among other things, the firm's activities in the COO market and the SEC investigation that led to the SEC Action. The purported class action complaints, which name as defendants Group Inc. and certain officers and employees of Group Inc. and its affiliates, generally allege violations of Sections 10(b) and 20(a) of the Exchange Act and seek unspecified damages. On June 25, 2010, certain shareholders and groups of shareholders moved to consolidate these actions and to appoint lead plaintiffs and lead counsel.

GS&Co., Goldman Sachs Mortgage Company and GS Mortgage Securities Corp. and three current or former Goldman Sachs employees are defendants in a putative class action commenced on December 11, 2008 in the U.S. District Court for the Southern District of New York brought on behalf of purchasers of various mortgage pass-through certificates and asset-backed certificates issued by various securitization trusts In 2007 and underwritten by GS&Co. The second amended complaint generally alleges that the registration statement and prospectus supplements for the certificates violated the federal securities laws, and seeks unspecified compensatory damages and rescission or recessionary damages. Defendants' motion to dismiss the second amended complaint was granted on January 28, 2010 with leave to replead certain claims. On March 31, 2010, the plaintiff filed a third amended complaint relating to two offerings, which the defendants moved to dismiss on June 22,2010. This motion to dismiss was denied as

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complaint, which was amended on February 4, 2011, asserts federal securities law and common law claims, and seeks unspecified compensatory, punitive and other damages.

Various alleged purchasers of, and counterparties involved in transactions relating to, mortgage pass-through certificates, COOs and other mortgage-related products (including the Federal Home Loan Banks of Seattle, Chicago and Indianapolis, the Charles Schwab Corporation, Cambridge Place Investment Management Inc., Basis Yield Alpha Fund (Master) and Landesbank Baden-Wurttemberg, among others) have filed complaints in state and federal court against firm affiliates, generally alleging that the offering documents for the securities that they purchased contained untrue statements of material facts and material omissions and generally seeking rescission and damages. Certain of these complaints also name other firms as defendants. Additionally, the National Credit Union Administration (NCUA) has stated that it intends to pursue similar claims on behalf of certain credit unions for which it acts as conservator, and the firm and the NCUA have entered into an agreement tolling the relevant statutes of limitation. A number of other entities have threatened to assert claims against the firm in connection with various mortgage-related offerings, and the firm has entered into agreements with a number of these entities to toll the relevant statute of limitations. The firm estimates, based on currently available information, that the aggregate cumulative losses experienced by the plaintiffs with respect to the securities at issue in active cases brought against the firm where purchasers are seeking rescission of mortgagerelated securities was approximately $457 million as of December 2010. This amount was calculated as the aggregate amount by which the initial purchase price for the securities allegedly purchased by the plaintiffs exceeds the estimated December 2010 value of those securities. This estimate does not include the potential NCUA claims or any claims by other purchasers in the same or other mortgage-related offerings that have not actually brought claims against the firm.

The firm has also received requests for information from regulators relating to the mortgage-related securitization process, subprime mortgages, COOs, synthetic mortgage-related products, particular transactions, and servicing and foreclosure activities, and is cooperating with the requests.

The firm expects to be the subject of additional putative shareholder derivative actions, purported class actions, rescission and "put back" claims and other litigation,

additional investor and shareholder demands, and additional regulatory and other investigations and actions with respect to mortgage-related offerings, loan sales, COOs, and servicing and foreclosure activities. See Note 18 for further information regarding mortgage-related contingencies.

GS&Co., along with numerous other financial institutions, is a defendant in an action brought by the City of Cleveland alleging that the defendants' activities in connection with securitizations of subprime mortgages created a "public nuisance" in Cleveland. The action is pending in the U.S. District Court for the Northern District of Ohio, and the complaint seeks, among other things, unspecified compensatory damages. The district court granted defendants' motion to dismiss by a decision dated May 15, 2009. The City appealed on May 18, 2009. The appellate court affirmed the complaint's dismissal by a decision dated July 27, 2010 and, on October 14, 2010, denied the City's petition for rehearing en banco On January 12, 2011, the City filed a petition for writ of certiorari with the U.S. Supreme Court.

Auction Products Matters. On August 21, 2008, GS&Co. entered into a settlement in principle with the Office of the Attorney General of the State of New York and the illinois Securities Department (on behalf of the North American Securities Administrators Association) regarding auction rate securities. Under the agreement, Goldman Sachs agreed, among other things, (i) to offer to repurchase at par the outstanding auction rate securities that its private wealth management clients purchased through the firm prior to February 11, 2008, with the exception of those auction rate securities where auctions are clearing, (ii) to continue to work with issuers and other interested parties, including regulatory and governmental entities, to expeditiously provide liquidity solutions for institutional investors, and (iii) to pay a $22.5 million fine. The settlement is subject to definitive documentation and approval by the various states. On June 2, 2009, GS&Co. entered into an Assurance of Discontinuance with the New York State Attorney General. On March 19, 2010, GS&Co. entered into an Administrative Consent Order with the Illinois Secretary of State, Securities Department, which had conducted an investigation on behalf of states other than New York. GS&Co has entered into similar consent orders with most states and is in the process of doing so with the remaining states.

On August 28, 2008, a putative shareholder derivative action was filed in the U.S. District Court for the Southern District of New York naming as defendants Group Inc., the Board, and certain senior officers. The complaint alleges generally that the Board breached its

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April 26, 2010, the plaintiffs moved for leave to proceed with a second phase of discovery encompassing additional transactions. On August 18, 2010, the court permitted discovery on eight additional transactions, and the plaintiffs filed a fourth amended complaint on October 7, 2010. The defendants filed a motion to dismiss certain aspects of the fourth amended complaint on October 21,2010, and the court granted that motion on January 13,2011.

Washington Mutual Securities Litigation. GS&Co. is among numerous underwriters named as defendants in a putative securities class action amended complaint flied on August 5, 2008 in the U.S. District Court for the Western District of Washington. As to the underwriters, plaintiffs allege that the offering documents in connection with various securities offerings by Washington Mutual, Inc. failed to describe accurately the company's exposure to mortgage-related activities in violation of the disclosure requirements of the federal securities laws. The defendants include past and present directors and officers of Washington Mutual, the company's former outside auditors, and numerous underwriters. By a decision dated May 15, 2009, the district court granted in part and denied in part the underwriter defendants' motion to dismiss, with leave to replead and, on June 15, 2009, plaintiffs filed an amended complaint. By a decision dated October 27, 2009, the federal district court granted and denied in part the underwriters' motion to dismiss. On October 12, 2010, the court granted class certification (except as to one transaction). On December 1, 2010, the defendants moved for partial judgment on the pleadings as to two of the offerings. By a decision dated January 28, 2011, the district court denied the defendants' motion for partial judgment on the pleadings.

GS&Co. underwrote approximately $520 million principal amount of securities to all purchasers in the offerings at issue in the complaint (excluding those offerings for which the claims have been dismissed).

On September 25,2008, the FDIC took over the primary banking operations of Washington Mutual, Inc. and then sold them. On September 27, 2008, Washington Mutual, Inc. filed for Chapter 11 bankruptcy in the U.S. bankruptcy court in Delaware.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

fiduciary duties and committed mismanagement in connection with its oversight of auction rate securities marketing and trading operations, that certain individual defendants engaged in insider selling by selling shares of Group lnc., and that the firm's public filings were" false and misleading in violation of the federal securities laws by failing to accurately disclose the alleged practices involving auction rate securities. The complaint seeks damages, injunctive and declaratory relief, restitution, and an order requiring the firm to adopt corporate reforms. On May 19, 2009, the district court granted defendants' motion to dismiss, and on July 20, 2009 denied plaintiffs' motion for reconsideration. Following the dismissal of the shareholder derivative action, the named plaintiff in such action sent the Board a letter demanding that the Board investigate the allegations set forth in the complaint, and the Board ultimately rejected the demand.

On September 4, 2008, Group Inc. was named as a defendant, together with numerous other financial services firms, in two complaints filed in the U.S. District Court for the Southern District of New York alleging that the defendants engaged in a conspiracy to manipulate the auction securities market in violation of federal antitrust laws. The actions were filed, respectively, on behalf of putative classes of issuers of and investors in auction rate securities and seek, among other things, treble damages in an unspecified amount. Defendants' motion to dismiss was granted on January 26, 2010. On March 1,2010, the plaintiffs filed a notice of appeal from the dismissal of their complaints.

Private Equity-Sponsored Acquisitions Litigation. Group Inc. and "GS Capital Partners" are among numerous private equity firms and investment banks named as defendants in a federal antitrust action filed in the US. District Court for the District of Massachusetts in December 2007. As amended, the complaint generally alleges that the defendants have colluded to limit competition in bidding for private equity-sponsored acquisitions of public companies, thereby resulUng in lower prevailing bids and, by extension, less consideration for shareholders of those companies in violation of Section 1 of the U.S. Sherman Antitrust Act and common law. The complaint seeks, among other things, treble damages in an unspecified amount Defendants moved to dismiss on August 27, 2008. The district court dismissed claims relating to certain transactions that were the subject of releases as part of the settlement of shareholder actions challenging such transactions, and by an order dated December 15, 2008 otherwIse denied the motion to dismiss. On

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On September 15, 2010, a putative class action was filed in the U.S. District for the Southern District of New York by three former female employees alleging that Group Inc. and GS&Co. have systematically discriminated against female employees in respect of compensation, promotion, assignments, mentoring and performance evaluations. The complaint alleges a class consisting of all female employees employed at specified levels by Group Inc. and GS&Co. since July 2002, and asserts claims under federal and New York City discrimination laws. The complaint seeks class action status, injunctive relief and unspecified amounts of compensatory, punitive and other damages. On November 22, 2010, Group Inc. and GS&Co. filed a motion to stay the claims of one of the named plaintiffs and to compel individual arbitration with that individual, based on an arbitration provision contained In an employment agreement between Group Inc. and the individual.

Transactions with the Hellenic Republic (Greece). Group Inc. and certain of its affiliates are subject to a number of investigations and reviews by various governmental and regulatory bodies and self-regulatory organizations in connection with the firm's transactions with the Hellenic Republic (Greece), including financing and swap transactions. Goldman Sachs is cooperating with the investigations and reviews.

Sales, Trading and Clearance Practices. Group Inc. and certain of ils affiliates are subject to a number of investigations and reviews by various governmental and regulatory bodies and self-regulatory organizations relating to the sales, trading and clearance of corporate and government securities and other financial products, including compliance with the SEC's short sale rule, algorithmic and quantitative trading, futures trading, securities lending practices, trading of credit derivative instruments, commodities trading and the effectiveness of insider trading controls and internal information barriers. Goldman Sachs is cooperating with the investigations and reviews.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

IndyMac Pass-Through Certificates Litigation. GS&Co. is among numerous underwriters named as defendants in a putative securities class action filed on May 14, 2009 in the U.s. District Court for the Southern District of New York. As to the underwriters, plaintiffs allege that the offering documents in connection with various securitizations of mortgage-related assets Violated the disclosure requirements of the federal securities laws. The defendants include IndyMac-related entities formed in connection with the securitizations, the underwriters of the offerings, certain ratings agencies which evaluated the credit quality of the securities, and certain former officers and directors of IndyMac affiliates. On November 2, 2009, the underwriters moved to dismiss the complaint. The motion was granted in part on February 17, 2010 to the extent of dismissing claims based on offerings in which no plaintiff purchased, and the court reserved judgment as to the other aspects of the motion. By a decision dated June 21, 2010, the district court formally dismissed all claims relating to offerings in which no named plaintiff purchased certificates (including all offerings underwritten by GS&Co.), and both granted and denied the defendants' motions to dismiss in various other respects. On May 17, 2010, four additional investors filed a motion seeking to intervene in order to assert claims based on additional offerings (including two underwritten by GS&Co.). On July 6, 2010, another additional investor filed a motion to intervene in order to assert claims based on additional offerings (none of which were underwritten by GS&Co.).

GS&Co. underwrote approximately $751 million principal amount of securities to all purchasers in the offerings at issue in the May 2010 motion to intervene. On July 11, 2008, IndyMac Bank was placed under an FDIC receivership, and on July 31, 2008, IndyMac Bancorp, Inc. filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court in Los Angeles, California.

Employment-Related Matters. On May 27, 2010, a putative class action was filed in the U.S. District Court for the Southern District of New York by several contingent technology workers who were employees of third-party vendors. The plaintiffs are seeking overtime pay for alleged hours worked In excess of 40 per work week. The complaint alleges that the plaintiffs were de facto employees of GS&Co. and that GS&Co. is responsible for the overtime pay under federal and state overtime laws. The complaint seeks class action status and unspecified damages.

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several individual California municipal plaintiffs was denied. All of these complaints against Group lnc., GSMMDP and GS Bank USA generally allege that the Goldman Sachs defendants participated in a conspiracy to arrange bids, fix prices and divide up the market for derivatives used by municipalities in refinancing and hedging transactions from 1992 to 2008. The complaints assert claims under the federal antitrust laws and either California's Cartwright Act or New York's Donnelly Act, and seek, among other things, treble damages under the antitrust laws in an unspecified amount and injunctive relief.

Financial Crisis-Related Matters. Group Inc. and certain of its affiliates are subject to a number of investigations and reviews by various governmental and regulatory bodies and self-regulatory organizations relating to the 2008 financial crisis, including the establishment and unwind of credit default swaps between Goldman Sachs and American International Group, Inc. (AIG) and other transactions with, and in the securities of, AIG, The Bear Stearns Companies Inc., Lehman Brothers Holdings Inc. and other firms. Goldman Sachs is cooperating with the investigations and reviews.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Municipal Securities Matters. Group Inc. and certain of its affiliates are subject to a number of investigations and reviews by various governmental and regulatory bodies and self-regulatory organizations relating to transactions involving municipal securities, including wall-cross procedures and conflict of interest disclosure with respect to state and municipal clients, the trading of municipal derivative instruments in connection with municipal offerings, political contribution rules and the possible impact of credit default swap transactions on municipal issuers. Goldman Sachs is cooperating with the investigations and reviews.

Group Inc" Goldman Sachs Mitsui Marine Derivative Products, L.P. (GSMMDP) and GS Bank USA are among numerous financial services firms that have been named as defendants in numerous substantially identical individual antitrust actions filed beginning on November 12, 2009 that have been coordinated with related antitrust class action litigation and Individual actions, in which no Goldman Sachs affiliate is named, for pre-trial proceedings in the U.S. District Court for the Southern District of New York. The plaintiffs include individual California municipal entities and three New York non-profit entities. On April 26, 2010, the Goldman Sachs defendants' motion to dismiss complaints filed by

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AKIN GUMP

STRAUSS HAUER & FELDLLP

JOHN M. DOWD 2028874386/fax: 2028874288 jdol'ld@aklngump.com

________ Attorneys at law

March 20,2011

Via e-mail

Assistant U.S. Attorney Jonathan Streeter Assistant U.S. Attorney Reed Brodsky

Special Assistant U.S. Attorney Andrew Michaelson The Silvio J. Mollo Building

United States Attorney's Office

One Saint Andrews Plaza

New York, New York 10007

Re: United States v. Raj Rajaratnam, 09 Cr. 1184 (RJH)

Dear Messrs. Streeter, Brodsky and Michaelson,

We are writing on behalf of Raj Rajaratnam to request the immediate production of documents sufficient to identify all open investigations of Goldman Sachs and/or any of its officers or directors by the Department of Justice, Securities and Exchange Commission, or other agency of the federal government, Given that the government has signaled its intention to call Lloyd Blankfein as a witness as early as this week, the immediate production of this material is clearly required by Brady v. Maryland, 373 U.s. 83 (1963), Giglio v. United States, 405 U.S. 150 (1972), and progeny, including the Second Circuit's decision in United States v, Chitty, 760 F.2d 425,428 (2d Cir. 1985) (Brady requires the government to disclose the fact that a witness is the subject of an investigation because that fact "provide[s] a motive to testify favorably to the Government. ''),

Please advise whether your office will produce this materia! no later than 5:00 p.m. on Monday March 21,2011. If you will not, the defense will move the Court to compel its production.

Robert s. Strauss Buirding {1333 New Hampshire Avenue. NW./Washlngton, D.C. :20036·15641202.687.4000 1 fax: 202.687.42881 aklngumpcom

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