On April 16, the SEC charged Goldman Sachs (GS) and Vice President Fabrice Tourre, with fraud alleging the bank omitted key information about a product it peddled to hedge against housing losses. Investors subsequently lost $1 billion. Goldman Sachs has denied any wrongdoing.
“The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation.” - Goldman Sachs Statement, 04/16/2010
(Pictured : John Paulson, Paulson & Co Inc. and Goldman, CEO Lloyd Blankfein)
Goldman Sachs' Execs Caught Off Guard With SEC Charges
READ: SEC Complaint Against Goldman
SEC Charges Goldman Sachs With Fraud
Video: Goldman Didn't See SEC Coming
Sir Allen Stanford and six others are accused of running a $7 billion Ponzi scheme in June 2009 and are charged with wire fraud, mail fraud, and conspiracy to commit securities fraud.
(Pictured : Allen Stanford)
In December 2008 after his sons told authorities their father had confessed, the SEC charged Bernard Madoff and Bernard L. Madoff Investment Securities LLC with securities fraud charges for perpetrating a massive $50 billion Ponzi scheme. Madoff eventually pled guilty and was sentenced to a 150 year prison term. Several others have been charged including Daniel Bonventre who was the director of operations, and close associate Frank DiPascali who pled guilty while aiding the government investigation. Only one billion dollars has been recovered for investors so far. (Pictured: Bernard Madoff)
In May of 2005, the SEC charged Time Warner Inc. (formerly AOL Time Warner) with materially overstating online advertising revenue and the number of subscribers. The charges were subsequently settled when the company agreed to pay $300 million in civil penalties to be distributed to impacted investors and restate financial results between 2000 and 2002 reducing reported revenues by $500 million. While CFO Wayne H. Pace, Controller James W. Barge, and Deputy Controller Pascal Desroches were charged with causing violations of the reporting provisions of the federal securities laws, under the settlement none faced any legal or monetary reprocussions and neither they or Time Warner were forced to admit any wrongdoing.
Prior to the public announcement in December 2002 that ImClone's monoclonal antibody would not receive FDA approval, company founder Samuel D. Waksal leaked the information to family and friends who illegally sold their shares. Included in the group of insiders was Martha Stewart, of Martha Stewart Living Omnimedia fame. Waksal ultimately pled guilty to securities fraud and was sentenced to seven years and three months in prison. Martha Stewart maintained her innocence, but was convicted for lying about the sale of stock and obstruction of justice and was sentenced to five months in prison and five months of home confinement with two years probation.
(Pictured: Martha Stewart and Samuel Waksal, Founder and former CEO of ImClone)
As prosecutors made their case for accounting fraud against the electronics manufacturer in September 2002, the SEC was also making charges against senior executives for the failure to disclose zero and low-interest loans to themselves and for failing to disclose millions of dollars in personal stock sales. Both CEO Dennis Kozlowski and CFO Mark Swartz were convicted and sentenced to between 8 1/3 to 25 years in prison and the company was slapped with a $50 million.
(Pictured: Dennis Kozlowski)
After billions of dollars in inflated profits unraveled under charges of accounting trickery, the company ultimately filed for bankruptcy in July 2002. CEO Bernard Ebbers was subsequently sentenced to 25 years in prison and CFO Scott Sullivan was sentenced to five years.
(Pictured: Former Worldcom CEO Bernard Ebbers)
Enron's inflation of its revenue through hyper-aggressive valuation of its trades hid billions of dollars in debt and ultimately led to the bankruptcy of the energy trading company in October 2001. The bankruptcy cost investors billions of dollars as the stock price plummeted. The investigation also uncovered insider trading at the executive level. While CEO Kenneth Lay died before he could be sentenced, several other executives were sentenced to jail time including former CEO Jeffrey Skilling, who received a 24-year sentence and CFO Andrew Fastow got 10 years.
(Pictured: Former Enron CEO Ken Lay)
In 1989, Michael Milken, then with Drexel, and known as the “Junk Bond King” was indicted on 98 counts of securities fraud and racketeering after an SEC insider-trading investigation. As part of a plea bargain, Milken plead guilty to several securities violations and was sentenced to 10 years in prison and fined $650 million.
(Pictured: Michael Milken, chairman of the Milken Institute)
Goldman Sachs is the latest in a long line of high profile fraud cases brought by the SEC