The Manhattan U.S. Attorney’s office has launched a criminal probe into whether Goldman Sachs or its employees committed securities fraud during mortgage trading, sources told the Wall Street Journal. The news comes two weeks after the Securities and Exchange Commission filed a civil securities fraud suit against the Wall Street powerhouse and one of its traders over negative bets against the housing market.
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Goldman Sachs may opt to settle its fraud case with the U.S. Securities and Exchange Commission in order to avoid continued public humiliation after being grilled over whether it defrauded mortgage investors, sources told the New York Post. The investment bank, which is accused of misleading buyers and betting against the mortgage market, has endured derisive senate inquiry, after the SEC’s April 16 announcement that it had filed suit against Goldman. [more]

Fabrice “Fabulous Fab” Tourre, of Goldman Sachs

Fabrice Tourre, the French bond trader named in the Securities and Exchange Commission’s case against Goldman Sachs, lived a lavish lifestyle in a roughly $4,500-per-month apartment in New York City until 2008 when he moved to London, according to the U.K.’s Daily Mail. Tourre, 31, who was “known for his expensive tastes at Goldman Sachs,” earned more than $2 million a year while selling mortgage investment deals to investors that were destined to fail, while other clients, like billionaire hedge fund manager John Paulson, were simultaneously betting against them. Tourre, who referred to himself as “Fabulous Fab” in a e-mail to a friend cited in the SEC complaint, was also known in his “fashionable block of flats for throwing noisy parties” that irked the neighbors. Tourre was reportedly absent from work today, but Goldman Sachs said it was a “personal decision” and that he had not been suspended by the bank.
[Daily Mail via NY Mag] and [The Guardian] 

It seems Goldman Sachs has larger problems than its employees’ complaints about the company’s new 200 West Street headquarters. The Securities and Exchange Commission filed a civil suit today that accuses the bank of engaging in securities fraud when it bet against a mortgage investment it was also selling to customers. The suit cites an investment called Abacus 2007-AC1, a bundle of mortgage bonds created in 2007, allegedly so that hedge fund manager John Paulson could bet against them. Paulson made an estimated $3.7 billion in 2007 on bets that the housing bubble would burst, according to the New York Times. Meanwhile, Goldman also sold the destined-to-fail Abacus deal to investors including foreign banks, pension funds, insurance companies and other hedge funds. Abacus was one of 25 deals of its kind — that is, investments created so that Goldman and certain clients could make negative bets against the housing market. [NYT]

Home and auto lender GMAC, which lost $10.3 billion in 2009, paid a hefty price to bring on new CEO Michael Carpenter in mid-November, according to a regulatory filing today. For the month-and-a-half he was working there, Carpenter received $1.2 million, which works out to about $9.5 million per year. That’s more akin to Goldman Sachs CEO Lloyd Blankfein’s salary — $9.6 million in 2009 — than to former GMAC CEO Alvaro de Molina’s, which was $3.7 million for the year. GMAC lost a record $3.9 billion in the fourth quarter and took a third government bailout. The company also paid Sam Ramsey, its Chief Risk Officer, $7.7 million, and Tom Marano, CEO of mortgage unit Residential Capital, $5.6 million. [Bloomberg]

With cash bonuses still in — relatively — short supply in the aftermath of the recession, Goldman Sachs seems to be doing its part to limit the cutbacks’ impact on luxury real estate. Gawker took a look at New York City property records this week and found that Goldman started lending to individual residential property owners in mid-2008, just as the financial system was beginning to collapse. There were 17 instances in total where Goldman is listed as the secured party on residential property transactions in the city; half of those involved employees of the firm. In late October 2008, managing director Oliver Frankel took out one such “hassle-free” mortgage from his employer for a co-op in Tribeca’s 34 Leonard Street, where units were selling between $2 million and $8 million earlier that year. Goldman has also granted loans to managing director T. Clark Munnell for his $6.6 million Park Avenue apartment, to banking technology manager Lancelot Braunstein, who bought a $2.1 million co-op in September, and to vice president Justin Lee for his $1.9 million Chelsea apartment, among others. Terms of the mortgages are not public, but the company recently told the Wall Street Journal that it has allowed “a small number of employees” to take out mortgages, that they carry normal interest rates and that they must be paid back. Gawker did uncover the terms of one particularly high-profile mortgage, though. Rodney Martin, the chief operating office of AIG’s life insurance unit was lent $4 million in April 2008 for a $4 million apartment at 15 Central Park West, courtesy of new neighbor and Goldman CEO Lloyd Blankfein’s company. The 30-year mortgage had a 4.8 percent interest rate and was interest-only for the first 10 years. [Gawker]

A penthouse apartment at 15 Central Park West changed hands yesterday,
but it seems it’s not the buyers or sellers who are moving so much as the paperwork. The buyer of the condo was DAAJJ, LLC, a partnership controlled by hedge fund manager and billionaire Dan Och. The seller was a trust in Och’s wife’s name. Och is hardly the building’s only high-profile resident. His neighbors include fellow financier Lloyd Blankfein, CEO Goldman Sachs and Yankee Alex Rodriguez. Wayne Gretzky also recently eyed a spot in the coveted property, where, despite the recession, prices have continued to increase. The Och’s also own a home in Scarsdale, which was purchased for $2.4 million in 2004. [Cityfile, 1st item]

Lloyd Blankfein,
chairman and CEO of Goldman Sachs, and his wife Laura have put their
apartment at 941 Park Avenue, at 81st Street, on the market for $15
million. The couple paid $27 million for an apartment at 15 Central
Park West in 2007, and settled into the home last year. The Park Avenue apartment has five bedrooms, a wood-burning fireplace
and a library. It is listed with Sotheby’s International Realty’s Royce Pinkwater.