Goldman Sachs NOT ABLE to shield court documents

[wildernessvoice]

The most powerful company in the world can not prevent public access to court documents that were FILED IN ERROR.

Perhaps you remember Greg Smith, a trader with Goldman Sachs up until early March. He quit the firm based on internal practices that clearly did not have the best interest of the client in mind. In a day of growing distrust of banks, Wall Street and just about any other financial institution, it seems that Goldman has gotten caught with its shorts down (pun intended).

Several years ago Goldman Sachs was sued by Overstock.com for what it claimed was price fixing. According to Overstock, Goldman sold naked shorts that it never covered, suppressing the price of Overstock shares. Basically, this means that Goldman was selling stock it never had, nor ever intended to have. The result is that shares are traded that don’t exist, increasing the supply artificially. Litigation was dismissed based on jurisdiction issues.

Goldman has repeatedly denied wrongdoing while Overstock has stood firm in its accusations. In fact, when Matt Taibbi of Rolling Stone contacted Goldman regarding this, Goldman responded with ad hominem attacks on Overstock, but didn’t present any facts to support its position:

Overstock pursued the lawsuit as part of its longstanding self-described “Jihad” designed to distract attention from its own failure to meet its projected growth and profitability goals and the resulting sharp drop in its stock price during the 2005-2006 period.

Interestingly, just a couple years later Overstock was thriving while Goldman Sachs was fleecing the taxpayers for bailouts.

Apparently Joe Floren, an attorney at Morgan Lewis, has been given the task of defending Goldman Sachs. But on Tuesday it seems that Mr. Floren may have exposed the very entity he’s been contracted to protect. Overstock, recognizing that it couldn’t get a trial, requested the release of sealed documentation that the company was convinced would expose Goldman. Here’s where it gets good. Floren, in defending Goldman’s position, apparently included some of the sealed documentation inadvertently.

The released information reveals some incredibly seditious activity on the part of both Goldman and Merrill Lynch (which is now part of Bank of America). It incriminates both for working together to hide these shorts and cover them on each other’s behalves when needed. If the rest of the sealed documentation is released, the shock waves could reverberate throughout the financial sector. There’s much more to the story.

Investors should be aware of this, especially in light of recent JP Morgan issues. The problems in the financial sector are far from over. In fact, they may be revving up anew. Consider carefully where you’re invested and how readily you can access your assets.

Readers will also recall that this is precisely the activity we suspect takes place in the metals markets. How long will these prices remain suppressed? We can’t know for sure. But sooner or later the pressure will release. Today’s action may have been the beginning. I’m looking forward to the ride up.

J. Keith Johnson’s Austrian and libertarian perspectives on current socioeconomic and geopolitical affairs are fueled by his insatiable desire to both discover and share the truth. A Goldco Direct affiliate, you’ll find his commentary on The Gold Informant website, as well as various Internet financial and news sites.

[styky]

wildernessvoice do you have a link for this?

[wildernessvoice]

http://dailycaller.com/2012/05/18/goldm ... es-shorts/

AND THE DOCUMENT IN QUESTION:

http://media.economist.com/sites/defaul ... %20MSJ.pdf

[wildernessvoice]

http://www.economist.com/node/21555472

Short-selling litigation
An enlightening mistake

May 15th 2012, 18:16 by M.V. | NEW YORK

A RARE slip-up by lawyers has helped to shed some rather interesting light on a high-profile legal battle, the details of which some of the largest Wall Street firms have been fighting to keep under wraps. In 2007 Overstock, a Utah-based online retailer, sued a dozen big brokers, alleging that they had caused its share price to fall sharply by helping their clients to engage in “naked” short selling.

In a normal short sale, the shares are borrowed (or at least “located”) with a broker’s help before being sold. In the naked version, there is no attempt to pre-borrow the stock or even check that it exists. This can create “fails to deliver”, where the trade is not settled when it should be because there are not enough actual shares available for delivery. This messes with the laws of supply and demand, allowing shorting to take place beyond the natural limits set by the number of borrowable shares. Regulators have long frowned upon naked shorting. The rules against the practice have been tightened up a number of times over the past seven years.

As the pre-trial discovery period proceeded, Overstock narrowed its focus to two firms, Goldman Sachs and Merrill Lynch, now part of Bank of America. Just before the case was set to go to trial in California, however, the judge dismissed it on jurisdictional grounds, ruling that not enough of the alleged wrongdoing had taken place in the state. Overstock appealed and pushed for all of the evidence to be unsealed. The defendants argued that virtually everything should remain sealed, in part because the documents contained “trade secrets”. Four media groups, including The Economist, jointly opposed a motion to seal on public-interest grounds. The judge decided that some of the documents should be released but stayed his ruling, pending appeal.

That was how things stood until the end of last week, when the defendants’ lawyers sent their opposition to a plaintiffs’ motion to the other parties in the case. One of the exhibits attached to this, presumably inadvertently, was an unredacted version of an earlier filing by Overstock, opposing the defendants’ motion to seal papers. Within this exhibit is an intriguing six-page section, “Facts Defendants Improperly Seek to Seal” (pages 14-20 of this), containing excerpts of e-mails written by Goldman and Merrill employees.

In a number of these, they discuss deliberately failing to settle client trades. One Merrill executive suggests the firm “might want to consider allowing…customers to fail,” to which a colleague replies: “We are going to look into that.” Another asks: “How and when can we prevent the delivery [of shares]?” In another e-mail he requests an update from a lieutenant on “how we are going to fix fails and I want to know what we nees [sic] to do to make 369 market makers fail.” In response to a question from a large client about efforts at “cleaning up” fails, a Goldman man says that “we will let you fail.” In another message, he refers to a senior colleague “really backing down from…cleaning up fails.”

Compliance officers repeatedly questioned this behaviour, according to the filing. A Merrill compliance person is quoted describing it as “totally unacceptable—we are failing when we have over a million shares of stock available…Is there a blanket agreement that we allow every market maker client to continue failing even if there is enough availability?” She adds that fails need to be “cleaned up regardless of who is causing them.”

The e-mails also suggest close commercial links between the two firms and at least one trading outfit that was a target of regulatory probes into shorting violations, SBA Trading. In one message, a Merrill employee forwards a sanctions order against SBA’s Scott Arenstein to a counterpart at Goldman, referring to Mr Arenstein as “our boy” and asking: “You think there will be any fallout on clearing firms?” The Overstock filing also refers to a telephone transcript in which a Merrill compliance officer and a colleague discuss the fact that Mr Arenstein’s “recycling” of short sales is “not okay”. In another e-mail, the deputy head of Goldman’s securities-lending group describes Mr Arenstein as being “the other side of a lot of our activity.”

Other missives suggest a cavalier attitude to the rules. In a 2005 e-mail, the president of one of Merrill’s stock-clearing businesses responds to internal concerns about the intentional failing of short sales thus: “f-word the compliance area—procedures, schmecedures.” He has since assured the court that this statement was a joke, according to the filing.

Goldman and Merrill have denied throughout that they participated in any sort of naked-shorting conspiracy. Their supporters argue that the legal action brought by Overstock is a crude tactic by Patrick Byrne, the retailer’s mercurial boss, to divert attention away from its long history of underperformance. (The firm continues to struggle, despite no longer being plagued by settlement failures.) Some question the link between failed trades and naked shorting, arguing that fails are generally the result of operational problems and other factors rather than naked nefariousness.

Nevertheless, the release of the e-mail excerpts will have done the brokers no favours. They suggest that trades were being intentionally failed; that some of those involved were aware regulators would not look kindly upon some of the activity; that some of the firms’ internal policemen were unhappy with the explanations they received for the proliferation of fails; and that at least one senior executive appeared to have an unusual attitude towards compliance.

The e-mails are just a very small part of the communications and other material unearthed during the four-year discovery process. If the court of appeal unstays the partial unsealing order, there will be much more to pore over, shining more light on an issue that has hitherto been as frustratingly murky as it has been controversial.

[wildernessvoice]

and a response to this article:

As the Economist article notes, this practice plays havoc with the normal mechanisms of Supply and Demand that would otherwise set the correct market price for a stock - without any help from the naked short sellers. Essentially, these brokers were flooding the market with non-existing stock on companies they wanted to fail. Since they never borrowed or bought the stock they were shorting, they didn’t even have any skin in the game. It was a no-lose proposition for the naked short sellers… even as they destroyed the companies they targeted, eliminated jobs, and screwed other investors who would have had no clue that unscrupulous brokers were flooding the market with unauthorized and therefore illegal shares.

No matter how you cut it, this type of activity is fraudulent and illegal.

Yes, Market Makers had the “options mark maker exemption” which permitted market makers to sell stock that they did not possess, so long as they were doing so temporarily to “maintain liquidity.” But, the exemption was never intended to be used to drive the price of a security down… which only benefits the short sellers, naked or otherwise.

It’s interesting to note too who pushed for the options mark maker exemption… none other than Bernie Madoff! Madoff also obtained an exemption that allowed market makers to sell short on a down-tick, undoing regulation that had been in effect since the 1934 Securities Exchange Act to protect companies from investors suddenly piling on to destroy the value of a company’s securities.

[wildernessvoice]

Goldman Sachs is the most powerful company in the world.
They staff the US Treasury, the presidents of Italy and Greece are Goldman Sachs employees.
The governor of the Bank of Canada is a Goldman Sachs man
....and the list goes on.
This powerful company had a lawyer screw up and file the facts of the case, private emails, in a court document.
The documents now sit for the world to read. Goldman Sachs is helpless on this issue.
Why?
It is that pesky concept that justice must be carried out in public and not behind closed doors.
I would hate to have motions, petitions to courts and other court documents filed in court and then decide that I don't want anybody else to have public access to these documents.
As Goldman Sachs discovered IT AIN'T GOING TO HAPPEN!
Just imagine filing a document and then trying to sue another party for putting a link to these public records.

[styky]

http://dailycaller.com/2012/05/18/goldmans-blunder-exposes-shorts/

AND THE DOCUMENT IN QUESTION:

http://media.economist.com/sites/defaul ... %20MSJ.pdf

Thanks bunches

[dave]

Be interesting to see how it all unfolds. As mentioned, they are one of the most powerful entities in the world.....l doubt any of this is an "accident"

[Julian]

...and the hypocrites put Conrad Black in prison! he is a saint by comparison to the establishment bankers.

[Edward Kennedy]

..banks are owned by the nwo scum and have a reason to keep gold and silver down.