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SEC suit dogs Goldman amid profits of $3.3B

NEW YORK — As Goldman Sachs Group Inc. executives held conference calls Tuesday to report its first-quarter profits had doubled, the questions focused more on the Securities and Exchange Commission's civil fraud charges against the company rather than its $3.3 billion earnings.

And the company came under scrutiny abroad. Britain's financial regulator said it had begun an investigation into Goldman Sachs International, the bank's London-based operations.

Goldman Sachs earned $5.59 a share on revenue of $12.78 billion as bond, commodities and currency trading buoyed its profits. That was well above expectations of analysts surveyed by Thomson Reuters. It was Goldman's second most profitable quarter since going public in 1999. In the fourth quarter, Goldman earned a record $4.79 billion.

Goldman also reported sharply higher fees from underwriting stock and debt offerings.

Yet investors remained fixated on Goldman's legal battles. On Friday, the SEC claimed that the firm defrauded investors in a mortgage-related deal.

During a conference call with analysts Tuesday, Goldman co-general counsel Greg Palm gave the company's most detailed rebuttal to date of the SEC charges. After an opening statement that mirrored the bank's previous comments, Palm took questions for nearly an hour in an exchange dominated by analyst' interest in the fraud charges.

Palm was asked why Goldman did not disclose to shareholders that it had been served with a Wells notice about the SEC's investigation of a transaction involving collateralized debt obligations. A Wells notice is a letter describing potential charges against a company and requesting a response.

Palm said the company does not report to shareholders every time it receives a Wells notice. "We just disclose it if we consider it to be material," he said. Palm said the company has provided the SEC with "an extensive amount of documents and testimony" over the past 18 months relating to the transaction.

The charges against Goldman took investors by surprise. Goldman's stock fell almost 13 percent on Friday. It opened higher Tuesday but then slipped 97 cents, or 0.6 percent, to $162.35 in heavy trading.

Palm repeated Goldman's statement that the company did not know that charges were going to be filed against it on Friday.

"We would never intentionally mislead anyone," Palm said.

SEC suit dogs Goldman amid profits of $3.3B 04/20/10 [Last modified: Tuesday, April 20, 2010 10:20pm]
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