Goldman Sachs & Co. has agreed to pay $550 million to settle civil fraud charges that accused the Wall Street giant of misleading buyers of mortgage-related investments, the Securities and Exchange Commission announced yesterday. The settlement came on the same day that the U.S. Senate passed the stiffest restrictions on banks and Wall Street since the Great Depression. It calls for Goldman to pay the SEC fines of $300 million. The rest of the funds will go to compensate those who lost money on their investments. Although the fine was the largest in SEC history, the company’s tab amounts to less than 5 percent of its 2009 net income of $12.2 billion after payment of dividends to preferred shareholders.
The settlement involves charges that Goldman sold mortgage investments without notifying buyers that the securities were crafted with input from a client that was betting on them to fail. The securities cost investors close to $1 billion while helping Goldman client Paulson & Co. capitalize on the housing bust, the SEC said in the charges filed on April 16. Goldman did not admit legal wrongdoing. Rather, the firm acknowledged in a statement that “it was a mistake” for its marketing materials to leave out that a Goldman client helped craft the portfolio and that the client’s financial interests ran counter to those of investors. (Read Goldman’s consent.)
