CalPERS Claims Goldman Concealed SEC Probe

Mounting problems for Goldman: CalPERS claims that when Goldman applied with the fund to become a real estate investment consultant, it misled the fund about it's legal status, specifically stating that it was not "the target of a formal investigation."

(June 2, 2010) — Officials from the California Public Employees’ Retirement System (CalPERS) said they’re looking over the selection of Goldman Sachs Group in the system’s real estate pool, claiming the bank failed to disclose that it faced a Securities and Exchange Commission (SEC) probe.

“We are reaching out to Goldman for an explanation,” said CalPERS spokesperson Clark McKinley to ai5000. He said he is unaware of when CalPERS would take action on the issue.

The bank’s erroneous assurances to the largest US public pension fund in March raises questions on Goldman Sachs’ ethics policies as some question whether the bank concealed information to garner business. The bank’s assurances also raise the issue of whether the bank had an obligation to inform shareholders and potential clients of the SEC’s letter alerting the firm of likely regulatory enforcement action.

The $204 billion pension giant is claiming the Wall Street firm failed to reveal that it was the target of an SEC investigation six months after US regulators notified the bank that it would probably be charged with fraud in connection to the underwriting and marketing of a $1 billion subprime-mortgage-linked security, according to a document obtained by Reuters. The SEC filed a civil suit against Goldman over that transaction of April 16.

According to Reuters, Goldman assured CalPERS on the bank’s March 18 application to become a real estate investment consultant to the largest US public pension fund.

Since the SEC’s lawsuit, several shareholders have filed lawsuits against Goldman Sachs, claiming investors were harmed by the firm’s reluctance to disclose the SEC notice.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742