The SEC's case against Goldman Sachs exploded onto the scene two weeks ago and has captured the headlines since that time. It has been followed by many of the usual developments in high profile cases alleging corporate fraud: a
Congressional hearing;
private securities class actions; and
related cases overseas, in this case by the UK's Financial Services Authority.
To date, the only thing that had been conspicuously absent was a parallel criminal investigation by the Department of Justice. According to various
reports today, however, the Justice Department has now joined the party, and opened a criminal investigation concerning certain mortgage securities deals Goldman arranged. The AP reports that the U.S. Attorney's office for the SDNY has opened the investigation following a referral by the SEC. Earlier this week, 62 House lawmakers also asked the DOJ to conduct a criminal probe of Goldman, saying in a letter that "[o]n the face of the SEC filing, criminal fraud on a historic scale seems to have occurred in this instance."
The WSJ
reports that the DOJ investigation is centered on different evidence than the SEC’s civil case and is at a preliminary stage. In any event, a criminal investigation poses the most serious challenge yet for Goldman, and the stakes have just gone way up.