Goldman Sachs discloses information on lawsuits filed by shareholders since SEC brought charge

Goldman discloses shareholder suits

Goldman Sachs has disclosed information about a half-dozen lawsuits filed against it by shareholders accusing the big Wall Street firm and top executives of misconduct and abuse in the wake of civil fraud charges brought by the government over mortgage securities deals.

The detailed disclosures came in a regulatory filing by the firm Monday with the Securities and Exchange Commission. Goldman, the most powerful firm on Wall Street, has been criticized for making less than complete public reporting of legal challenges. Last summer, for example, the firm didn’t disclose that it had received a notice from the SEC staff that it was considering filing charges against it — a disclosure that would have been voluntary under SEC rules but concerned an event that could be considered significant to shareholders.

Goldman’s filing notes that the litigation by shareholders makes claims against the firm and its executives of “breach of fiduciary duty, corporate waste, abuse of control, mismanagement and unjust enrichment,” and also challenges the accuracy and completeness of its past disclosures. The shareholders are seeking damages, restitution and corporate government reforms by the firm.

Lawsuits by shareholders have multiplied and shares of Goldman Sachs Group Inc. have plummeted since news on April 16 of the SEC’s civil lawsuit against the firm and a trader, Fabrice Tourre. That was followed by a Senate hearing last Tuesday at which Goldman executives, including CEO Lloyd Blankfein, were grilled and publicly rebuked by indignant lawmakers. Then came word Thursday that the Justice Department had opened a criminal investigation of Goldman in connection with mortgage securities transactions it arranged in the run-up to the subprime mortgage meltdown in 2007.

The inquiry by federal prosecutors in Manhattan is in a preliminary state and it is far from certain that it will result in criminal charges being brought.

Goldman shares plunged 9 percent last Friday to $145.20. That was the day after the criminal inquiry became known, and following Standard & Poor’s analysts’ downgrade to “Sell” from “Hold” and reduction of their target price for Goldman by $40, to $140.

The stock recovered in trading Monday, finishing at $149.50 — still far below the $184 level it reached on April 15, the day before the SEC charges were filed.

The SEC alleged that Goldman misled investors in 2006-2007 by failing to tell them the subprime mortgage securities had been chosen with help from a Goldman hedge fund client, Paulson & Co., who was betting the investments would fail. Goldman and Tourre have denied wrongdoing and said they will contest the allegations in court.