If charges are filed, they will likely be related to perjury, specifically lying to Congress. An alternative charge of institutional corruption would be much more complex and could easily be buried in years of legal paperwork. NY Times Dealbook confirms tonight that Goldman executives will soon be interviewed by the Justice Department, but that no subpoenas have been issued.
A spokesman for Goldman said executives at the firm were expected to be interviewed by the Justice Department. The agency is conducting an inquiry that stems from a 650-page report produced earlier this year by the Senate Permanent Subcommittee on Investigations. That report said that Goldman had misled clients about its practices related to mortgage-linked securities.
“As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department’s inquiry into certain matters raised in the P.S.I. report hired counsel at the outset,” Goldman Sachs said in a statement.
While investors apparently feared the worst on Monday, a person close to the matter said that Mr. Blankfein had not been subpoenaed and that no Goldman executive had received an individual subpoena. Goldman is cooperating with the Justice Department investigation.
John Carney hints that the charge, if any will likely be perjury."If Blankfein hired him in a personal capacity, it means that his interests and Goldman's have diverged. That's bad news for one of them," a well-known criminal defense attorney in Washington who is not involved with the case told me.
Earlier this year, Goldman was accused of possibly misleading a Senate panel that looked into the financial crisis. Executives from Goldman, including Blankfein, testified that their short positions on the U.S. housing market were hedges against long positions. The company was not "net short" the housing market, the executives said. Other evidence indicated that Goldman was net short. The chairman of the Senate investigations panel referred the case to the Justice Department for possible perjury charges against the Goldman executives.
As I pointed out in April, there seems to have been a dispute within Goldman about the character of the firm's short positions. Blankfein and other top executives are convinced that they were hedging other exposure. But the traders putting on the positions saw themselves as making a heroic market call.
The attorney I spoke with said that it could mean that Blankfein has reason to believe he could personally be a defendant in a civil or criminal case.
Matt Taibbi wrote in Rolling Stone about a month after the Levin report came out:
They weren't murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.
Defenders of Goldman have been quick to insist that while the bank may have had a few ethical slips here and there, its only real offense was being too good at making money. We now know, unequivocally, that this is bullshit. Goldman isn't a pudgy housewife who broke her diet with a few Nilla Wafers between meals — it's an advanced-stage, 1,100-pound medical emergency who hasn't left his apartment in six years, and is found by paramedics buried up to his eyes in cupcake wrappers and pizza boxes. If the evidence in the Levin report is ignored, then Goldman will have achieved a kind of corrupt-enterprise nirvana. Caught, but still free: above the law.
This isn't just a matter of a few seedy guys stealing a few bucks. This is America: Corporate stealing is practically the national pastime, and Goldman Sachs is far from the only company to get away with doing it. But the prominence of this bank and the high-profile nature of its confrontation with a powerful Senate committee makes this a political story as well. If the Justice Department fails to give the American people a chance to judge this case — if Goldman skates without so much as a trial — it will confirm once and for all the embarrassing truth: that the law in America is subjective, and crime is defined not by what you did, but by who you are.
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