CJR: SEC charges against Goldman Sachs are big win for business press
Brad Allen (left) of MinnPost.com questions SEC enforcement chief Robert Khuzami after his keynote speech at the SABEW Conference in March in Phoenix.
Former Wall Street Journal reporter Ryan Chittum sings a song of praise to The New York Times and reporters Louise Story and Gretchen Morgenson for their Christmas Eve story outlining the deal that preceded the Securities and Exchange Commission’s suing Goldman Sachs today for fraud. ”There’s no doubt that press coverage was instrumental in this turn of events,” he writes at CJR.org, where he is a staff writer for its business section, The Audit.
”This is a huge story. The SEC has found that its jaws still snap; Goldman, which has heretofore seemed virtually untouchable, is in the docket; it illustrates short sellers’ — John Paulson specifically here — role in creating the crisis and making billions off it; and the press and bloggers can claim a big victory,” he writes.
The Times reported that Goldman Sachs structured its Abacus deals so that they would fail, while betting against them. “As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars,” the Times said.
Robert Khuzami, the SEC’s director of enforcement, said in bringing the suit: “The product was new and complex, but the deception and conflicts are old and simple.”
Speaking at the SABEW Conference in Phoenix in March, Khuzami acknowledged that “the articles you write and edit” suggest investigations, as well as the 700,000 complaints the agency received in 2009. “By definition, tips, referrals, headlines are often lagging indicators of fraud.”
The SEC alleges that Goldman misled investors by telling them another company was picking the bonds for the collateralized debt obligations it was offering when it was actually hedge-fund manager Paulson.
”Goes to show you what good, tough journalism can do. Fraud charges have finally hit Wall Street, and The New York Times was instrumental in digging it out,” Chittum concludes.
