Fraud claims cloud ‘giant vampire squid’
Goldman Sachs Group — last year described as a “giant vampire squid wrapped around the face of humanity” by Rolling Stone magazine — reported blowout quarterly earnings yesterday; but investors appeared to focus on the U.S. fraud case against the bank as Britain’s market watchdog launched its own probe.
The results, which failed to boost its shares, came four days after the U.S. Securities and Exchange Commission accused the dominant Wall Street bank of defrauding investors by failing to say that a prominent hedge fund manager bet against a Goldman subprime mortgage debt product that he helped design.
Goldman said first-quarter net income nearly doubled to $3.29 billion, bolstered by strength in fixed income trading and principal investments.
The bank reported its lowest-ever first-quarter compensation ratio, but it still set aside $5.5 billion for compensation and benefits in the period.
Goldman emerged as Wall Street’s most influential bank after the financial crisis but has faced a backlash over its pay and business practices.
Greg Palm, the bank’s co-general counsel, rebutted the SEC charges during the bank’s earnings conference call. Palm said the firm was “very disappointed” that the SEC brought charges and said Goldman “would never mislead anyone.”