Connecticut Attorney General's Office

Press Release

Attorney General Condemns Alleged Goldman Sachs Scam

April 16, 2010

            “There may well be a factual and legal basis to consider state investigation of allegations related to the SEC’s civil action against Goldman Sachs, and my office has begun a preliminary review.

            “The SEC’s allegations read like a Sopranos episode. The SEC is accusing Goldman Sachs of constructing -- at hedge fund manager John Paulson’s request -- securities designed to fail so that Paulson’s hedge fund could make billions betting against them. It would be like Goldman selling consumers houses deliberately designed to collapse just so Paulson could collect the insurance.

“If true, these allegations constitute outright fraud. Goldman Sachs is accused of fleecing its own clients -- selling them securities it knew would implode -- to enrich itself and Paulson.

“A key question is whether this case was an isolated incident or part of a pattern of investment banks colluding with hedge funds to purposely tank securities they created and sold to unwitting investors. The Wall Street bankers and anyone who knowingly and purposely profited from this alleged scheme should be held accountable. 

“These allegations provide further powerful proof of the urgent need for financial reform -- including regulation of opaque derivatives markets that helped this alleged scheme succeed. Congress must pass legislation to stop such abuses before they wreck our economy. Wall Street must enable the American Dream, not undermine it.”