Washington/New York : US federal prosecutors in New York have begun investigating Goldman Sachs Group, raising the possibility of criminal charges against the company or its employees, a source familiar with the situation said on Thursday.
Goldman, the world's most powerful investment bank, said it was not surprised at the news. "Given the recent focus on the firm, we are not surprised by the report of an inquiry," a Goldman spokesman said. "We would fully cooperate with any requests for information."
The investigation from the Manhattan US Attorney's Office ramps up pressure on Goldman less than two weeks after it was charged by the US Securities and Exchange Commission with civil fraud for allegedly hiding information from investors about a mortgage-related security.
Cross-examined
It comes only two days after Goldman CEO Lloyd Blankfein and other executives faced blistering cross-examinations from lawmakers at a Washington hearing into their behaviour in trading mortgage-related products as the US housing market began to crumble in 2007.
Goldman, which had prided itself on its government connections, is now facing one of the biggest crises in its 140 year history and has become a poster boy for criticism of Wall Street's conduct that led up to the financial crisis.
In recent days there has been some speculation that Goldman might prefer to settle the SEC case to avoid further reputational damage.
In the closing hours of the questioning on Tuesday, Blankfein said Goldman was doing some soul-searching and going over its business practices as a result of the accusations it was facing.
It was not immediately clear precisely which transactions prosecutors are investigating or whether there was a strong possibility that criminal charges could be brought.
News of the criminal probe was first reported by the Wall Street Journal, which said it resulted from a referral from the SEC.
A spokeswoman for the office of the Manhattan US Attorney said she could "neither confirm nor deny" any Goldman investigation. The criminal investigation is centred on different evidence than the SEC's civil case, according to the Journal.
The SEC lawsuit against Goldman concerns collateralised debt obligations in transactions known as Abacus. The SEC accused Goldman of failing to tell investors that securities underlying Abacus were chosen by billionaire hedge fund investor John Paulson, who was betting that the securities would lose value.
A team of federal prosecutors in Brooklyn, New York, scrutinised the Timberwolf deal, said several people familiar with the investigation.
