Goldman seeks to avoid fraud charge

Goldman Sachs is seeking to avoid a fraud charge as part of its settlement with the United States market regulator SEC, which had charged the investment banking major with defrauding investors by misrepresenting facts, a media report said.

Citing people familiar with the situation, the Wall Street Journal said, "Goldman Sachs Group Inc has told the Securities and Exchange Commission that the company hopes to avoid a fraud charge as part of any settlement of last month's lawsuit against the securities firm."

On April 16, the Securities and Exchange Commission had filed a lawsuit in the US District Court in New York charging Goldman Sachs with defrauding and causing an alleged loss of over $1 billion to investors by misrepresenting facts about a financial product tied to sub-prime mortgages.

The WSJ report said that it was not unusual for companies accused by the SEC to try to negotiate a lesser charge in settlement talks.

Although Goldman has repeatedly denied any wrongdoing, many analysts expect the company to agree to a fine and other penalties in order to resolve the suit, it said.

Lawyers for Goldman have met with SEC representatives at least once since the suit was filed. However, it is not clear how the SEC responded to indications from Goldman that the company hopes to reach a settlement tied to a lesser charge than fraud, the report added.

People familiar with the preliminary settlement discussions have said no agreement is imminent.

An analyst at Sanford C Bernstein & Co has estimated that Goldman could wind up paying about $621 million to reach a settlement.

Based on previous settlements between the government and Wall Street, the analyst believes the SEC would agree to a $250 million fine.

In addition, it is likely that Goldman would have to redeem $371 million from investors who put money in the securities at the centre of the SEC's lawsuit, the WSJ report said.