Goldman May Be Better Off Cutting its Losses in SEC Standoff

Professors of securities law who have examined the SEC’s lawsuit against Goldman Sachs (GS) believe the most profitable firm in Wall Street may be better off cutting its losses instead of fighting what it terms “unfounded” fraud claims in connection with the collapse of the subprime mortgage market.

Bloomberg: Goldman “will probably lose what is typically the first hurdle in court, a motion to throw out the April 16 suit because it lacks legal merit, the professors said in interviews this week. After that, Goldman Sachs’s risks will mount and its negotiating position will weaken, they said”.

According to Thomas Hazen of the University of North Carolina at Chapel Hill, whose books include a two-volume treatise on broker-dealer law, “there’s a very low probability that Goldman could get the case dismissed.

“Every pretrial motion the SEC wins, Goldman gets one step closer to losing”, said Hazen.

Goldman has announced that it will vigorously contest the claims. However, a Goldman Sachs spokesman, notes Bloomberg, declined to comment yesterday on the likelihood of getting the case dismissed.

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