Goldman Sachs: Fraud alleged by SEC is not an isolated incident
By OffshoreAlert, April 20, 2010
News that Goldman Sachs has been accused of defrauding its own clients by the U. S. Securities and Exchange Commission came as no surprise to OffshoreAlert.
In the late 1990s, OffshoreAlert found out first-hand what little regard Goldman Sachs had for its smaller customers – and the investing public at large – when we exposed a Bermuda-based insurance broker that went on to commit frauds of approximately $1 billion on the global reinsurance market and at least $50 million on investors.
OffshoreAlert began exposing Stirling Cooke Brown Holdings in November, 1997 – the same month that the broker was taken public by Goldman Sachs at $22 per share in a $50 million IPO, after which Goldman continued to control 23% of the broker's shares through various onshore and offshore investment funds and had two seats on Stirling Cooke's small Board of Directors.
The headline of our first story said it all: 'What investors will not find in Stirling Cooke's share prospectus' and detailed a plethora of material negative information, including prior allegations of fraud against some of its principals, that was not disclosed to investors.
OffshoreAlert continued to expose Stirling Cooke relentlessly until the broker filed for bankruptcy in December, 2003 under the weight of numerous arbitrations and litigation in which several reinsurance contracts brokered by the firm were voided due to fraud. Its share price plummeted to zero – an outcome that was inevitable the day the shares were first publicly-listed.
"If OffshoreAlert could find out all of this negative information, it defied belief that a company the size of Goldman Sachs, with all of its resources, couldn't," says David Marchant, publisher of OffshoreAlert. "At the very least, Goldman Sachs was negligent and incompetent. At worst, it was knowingly involved in one of the biggest reinsurance frauds ever perpetrated. My investigation led me to believe it was the latter.
"I informed Goldman Sachs from the outset that a fraud was being committed and I offered to give them my evidence free of charge – but I was rebuffed. I contacted Goldman four times and, on each occasion, the firm's representatives did not respond to my inquiries.
"The only possible conclusion was that Goldman Sachs had a lack of concern for the welfare of investors – even its own clients – and reinsurers. It was the epitome of sleaze."
Despite making several materially false filings with the SEC while under the control of Goldman Sachs, the SEC never took any action against Stirling Cooke and, in a sad indictment on the state of financial journalism, OffshoreAlert could not persuade a single news organization to report what was going on, despite offering to hand them the evidence on a plate.
A final twist to the sordid story was yet to come when, astonishingly, the Goldman Sachs Managing Director who was responsible for the Stirling Cooke account and who served as a director of Stirling Cooke throughout its international crime spree later went on to become the Chairman of the Commodity Futures Trading Commission, the federal agency that regulates commodity futures and options on futures trading in the United States.
He is Reuben Jeffery III, a close associate of former US. President George W. Bush, who nominated him for the CFTC position and whom Jeffery served in a number of positions, including Special Assistant to the President, Senior Director for International Economic Affairs at the National Security Council, and Under Secretary of State for Economic, Energy and Agricultural Affairs.
"It is remarkable that someone who was either knowingly involved in a massive fraud or, alternatively, could not spot it when it was right in front of his face could be deemed suitable to be a top regulator," says Marchant. "What confidence can investors have in the financial system when someone who has played a leading role in a major scandal is appointed to such a lofty position, apparently because of his political connections rather than his ability to regulate? No wonder the financial industry is in such a mess."
Any clients of Goldman Sachs or Wall Street's other financial institutions who want assistance in detecting whether they are being ripped off will benefit from several sessions on how to conduct financial due diligence that will take place at The 8th Annual OffshoreAlert Financial Due Diligence Conference, in Association with Grant Thornton, at The Ritz-Carlton, South Beach on May 2-4, 2010.
Ominously for Wall Street's countless dubious companies, other sessions are being presented by the world's leading asset recovery attorneys, who will show attendees how to go about locating, freezing and seizing the assets of those responsible for defrauding them and will explain the legal standards for determining who might be liable for their losses, such as financial advisors, banks, auditors, officers and directors.
Details about the event can be found at www.OffshoreAlertConference.com.
ONE-OF-A-KIND SUBSTANCE IN ABUNDANCE
Nobody does what OffshoreAlert does. We are the epitome of unique. Our emphasis is on substance, not commerciality, and our independence allows us to bring the best pro- and anti-offshore advocates under one roof to discuss all material issues. You will not find what we offer anywhere else.
30 Countries
300 Professionals
Half of our attendees live in Offshore Financial Centers and the other half live in the world's major countries. What a mix! In 2009, we even had 19 reporters cover our event and it was profiled in The Wall Street Journal.
Agents & Provocateurs
The Regulated & The Regulators
Someone involved in asset protection and loophole-finding may well be sitting next to someone specializing in asset recovery and loophole-closing. That's one of the unique aspects of our conference. Meeting people on the other side of the fence is healthy, fun and something we encourage.
Move with the Goal Posts
Always up-to-date / Always Relevant
Offshore Finance is a constant game of cat-and-mouse between tax collectors and tax minimizers. The goal-posts are forever being shifted and what's legal one year might well be illegal the next. To remain in the game over the long-term, let us explain all material new developments to you.
