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Goldman Sachs faces questions in Europe

LONDON — Goldman Sachs is facing a potential backlash in Europe over the fraud case brought against it in the United States, with British Prime Minister Gordon Brown calling for authorities there to investigate and accusing the investment bank of "moral bankruptcy."

Germany also said it would ask for detailed information about the case.

Both governments had to bail out banks that lost hundreds of millions of dollars on investments marketed by Goldman, according to the fraud suit brought by the U.S. Securities and Exchange Commission, in Britain's case Royal Bank of Scotland through its acquisition of parts of ABN Amro.

The SEC said the Royal Bank of Scotland paid Goldman $841 million to unwind ABN Amro transactions. Royal Bank of Scotland is now 84 percent owned by British taxpayers after being partly nationalized by the government.

Germany's IKB Deutsche Industriebank AG, an early victim of the credit crunch, lost nearly all its $150 million investment, the SEC said.

Brown on Sunday called for a full inquiry by Britain's Financial Services Authority in conjunction with the SEC. Britain would join Germany, where government officials said they would seek information about the bank's activities.

Brown, currently facing a tough re-election battle, seemed additionally angry at Goldman Sachs' plan to pay $5.4 billion in bonuses, as reported in British newspapers. "I am shocked at this moral bankruptcy," he said on BBC TV. "This is probably one of the worst cases that we have seen."

Goldman Sachs already is facing an EU investigation into a 2002 swap deal it carried out with Greece that may have helped hide the extent of the country's financial troubles.

Goldman Sachs faces questions in Europe 04/18/10 [Last modified: Sunday, April 18, 2010 9:44pm]

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