Accusations against the Goldman Sachs Group were formally referred to the Justice Department and the SEC Exchange Commission.  Senators Carl Levin and Tom Coburn, the Democratic chairman and senior Republican on the Permanent Subcommittee on Investigations, signed a referral letter asking the agencies to examine last month's Senate Panel report, which accused the firm of misleading clients about mortgage-linked securities which.  That report also pinned much of the blame for the credit crisis on Wall Street banks that earned billions while enticing clients to buy the risky bond deals - focusing its criticisms mostly on Goldman and Deutsche Bank.

• “If something comes up that needs to be reviewed by some agency, it gets referred.  That’s the way we do it.”  - - Sen. Levin.
• A formal referral from the Senate is “much more than a symbolic gesture” because it would prompt an agency to put the matter “at the top of its list.”  - - Prof. Robert Hillman, UC Davis School of Law.
• "The question is how much pain [Goldman is] going to have to endure with the public spotlight for these revelations, and that depends in part how long the government’s willing to drag this out.”   - - Prof. James Cox, Duke U. School of Law.

Still, Prof. Cox is “very skeptical” that the DOJ and SEC investigations will ultimately lead to new claims against Goldman Sachs.  And Prof. Hillman notes that, given Goldman Sachs’s 2010 settlement, the SEC or DOJ would likely have a high bar for bringing a case against the bank.

        Possible Perjury Charges.   Sen. Levin also asked federal prosecutors to review whether to bring perjury charges against Goldman Sachs Chairman and CEO Lloyd Blankfein and other current and former employees who testified to Congress last year.  Mr. Levin said they denied under oath that Goldman Sachs took a financial position against the mortgage market solely for its own profit, statements the senator said were untrue.

The SEC’s review of the Senate report reportedly will scrutinize interviews, emails and other confidential documents that surfaced in the inquiry.  While much of that evidence was seen by the SEC before its 2010 settlement, some apparently is new.

        Goldman Counters.   When the report was released, Goldman Sachs said it never misled anyone about its activities.  “The testimony we gave was truthful and accurate and this is confirmed by the subcommittee’s own report,” according to a spokesperson. 

        Goldman and Deutsche Bank.   The panel's report saved its harshest criticism for Goldman Sachs, as well as Deutsche Bank AG, which was accused of selling CDO's backed by risky loans that the bank’s own traders believed were likely to lose value.  In a separate matter, the Justice Department today sued Deutsche Bank and one of its mortgage units for more than $1 billion for allegedly lying to qualify thousands of risky mortgages for insurance by the Federal Housing Administration.  The bank said the claims were “unreasonable and unfair.”   

For further details, go to:   [Bloomberg, 5/3/11]