Pension Funds vs. Buffett in Goldman Battle

US pension funds and other shareholders have aggressively sued Goldman Sachs in the wake of SEC fraud charges, but the Oracle of Omaha defends the bank's credibility.

(May 4, 2010) — Following the Securities and Exchange Commission’s fraud charges against Goldman Sachs last month, the banking giant has been hit with a flurry of shareholder lawsuits filed by US pension funds. Warren Buffett, on the other hand, defends the banking giant.

“I haven’t seen anything in Goldman’s behavior that makes it any more subject to criticism than Wall Street generally,” Berkshire Hathaway CEO Buffett has stated. As the investment bank fights for its reputation, Buffett has declared he has no plans to sell Berkshire Hathaway’s stake in Goldman.

Meanwhile, in a recent filing with the SEC, Goldman outlined seven legal actions that shareholders have taken against the firm since the regulator’s suit in federal count in Manhattan on April 16. The private lawsuits demand compensation from the bank, action against execs, and changes to how the firm operates. Goldman said it expected to have additional litigation in the future, while calling the SEC’s allegations unfounded.

According to Financial News, the Louisiana Municipal Police Employees Retirement System (MPERS) is a plaintiff in one of the suits. The Southeastern Pennsylvania Transportation Authority and International Brotherhood of Electrical Workers Local 98 Pension Fund are co-lead plaintiffs in another. The funds claim that Goldman’s trading business has been conducted unethically and assert that the SEC charge could threaten the Wall Street firm’s reputation in the long run.

Goldman’s Chief Executive Officer Lloyd Blankfein has been busy launching a media offensive to restore trust with investors and the public. The CEO appeared on both The Charlie Rose Show and in an interview on CNN with Fareed Zakaria to defend the bank’s reputation, saying he would resign as CEO if he thought it would help the firm’s future. Some estimate that Goldman’s legal fees could reach up to $100 million.

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