Reuters, NEW YORK, Fri Apr 16, 2010 11:10am EDT
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| The new Goldman Sachs Group Inc. global headquarters, also known by its address as 200 West Street, is pictured in New York's lower Manhattan April 7, 2010. Credit: Reuters/Brendan McDermid |
(Reuters) - Goldman Sachs Group Inc was charged with fraud on Friday by the U.S. Securities and Exchange Commission in the structuring and marketing of a debt product tied to subprime mortgages.
The SEC alleged that Goldman structured and marketed a synthetic collateralized debt obligation that hinged on the performance of subprime residential mortgage-backed securities, and which cost investors more than $1 billion.
It alleged that Goldman did not tell investors "vital information" about the CDO, called ABACUS. This included that a major hedge fund, Paulson & Co, was involved in choosing which securities would be part of the portfolio, and had taken a short position against the CDO in a bet its value would fall.
According to the SEC complaint, Paulson & Co paid Goldman $15 million to structure the CDO, which closed on April 26, 2007. Little more than nine months later, 99 percent of the portfolio had been downgraded, the SEC said.
The SEC said Goldman Vice President Fabrice Tourre was principally responsible for creating ABACUS. It also charged him with fraud.
Goldman, Paulson and Tourre were not immediately available for comment.
Shares of Goldman sank $19.39, or 10.5 percent, to $164.88 in morning trading on the New York Stock Exchange.
(Reporting by Jonathan Stempel. Editing by Robert MacMillan)
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| A television at the NYSE showed the effect of fraud charges on Goldman Sach’s stock price on on Friday. (AFP Photo/Getty Images) |
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