Goldman Sachs Subprime Mortgage Securities Case
Goldman Sachs Subprime Mortgage Securities Case
Shalonda Floyd
Ethical Issues in Business and Accounting
Professor Gates
February 5, 2013
Goldman Sachs Subprime Mortgage Securities Case The Code of Ethics has been written and discussed by CEOs and management on how a business will conduct in the workplace. They implement these codes of ethics for everyone in the company. They supposed to create self-evaluation for employees, comply with government laws, and promote higher standards of business ethics. On April 16, 2010, the Securities & Exchange Commission (SEC) filed a civil lawsuit against the large Investment Banking Firm of Goldman Sachs. The SEC accuses Goldman of securities fraud and illegal activity by engaging in transactions that allegedly defrauded their investors. These charges came upon when they sold junk quality and failure products to clients as subprime mortgages. Goldman denies any allegations placed on his firm. The company is arguing the client was well aware of the business risk transactions. The SEC believes that the company behavior was inappropriate, and actions were unethical. The mortgage security activity was investigated Tand examined thoroughly for ethical issues. According to Jeffers and Mogielnicki, (2010), the SEC had to examine for benchmarks, prior to making a decision on the case against Goldman. They are (1) an examination of the business risk within the investment banking industry, (2) a comparison with Goldman Sachs’ own Code of Business Conduct and Ethics, its Waiver of the Code and its Business principles; (3) an examination of the IMA’s code of Ethical Standards, and (4) a discussion of the traditional notions of fraud, ethics, and conflicts of interest. Then, Fabrice Tourre, a former employee was brought against fraud charges because he made false, misleading statements and omissions within the Abacus 2007-AC1. Goldman structured this collateralized debt obligation back in 2007 due to decline in the
Shalonda Floyd
Ethical Issues in Business and Accounting
Professor Gates
February 5, 2013
Goldman Sachs Subprime Mortgage Securities Case The Code of Ethics has been written and discussed by CEOs and management on how a business will conduct in the workplace. They implement these codes of ethics for everyone in the company. They supposed to create self-evaluation for employees, comply with government laws, and promote higher standards of business ethics. On April 16, 2010, the Securities & Exchange Commission (SEC) filed a civil lawsuit against the large Investment Banking Firm of Goldman Sachs. The SEC accuses Goldman of securities fraud and illegal activity by engaging in transactions that allegedly defrauded their investors. These charges came upon when they sold junk quality and failure products to clients as subprime mortgages. Goldman denies any allegations placed on his firm. The company is arguing the client was well aware of the business risk transactions. The SEC believes that the company behavior was inappropriate, and actions were unethical. The mortgage security activity was investigated Tand examined thoroughly for ethical issues. According to Jeffers and Mogielnicki, (2010), the SEC had to examine for benchmarks, prior to making a decision on the case against Goldman. They are (1) an examination of the business risk within the investment banking industry, (2) a comparison with Goldman Sachs’ own Code of Business Conduct and Ethics, its Waiver of the Code and its Business principles; (3) an examination of the IMA’s code of Ethical Standards, and (4) a discussion of the traditional notions of fraud, ethics, and conflicts of interest. Then, Fabrice Tourre, a former employee was brought against fraud charges because he made false, misleading statements and omissions within the Abacus 2007-AC1. Goldman structured this collateralized debt obligation back in 2007 due to decline in the
References: Mogielnicki, M., & Jeffers, A. E. (2010). Ethical Implications of the Goldman Sachs Subprime Mortgage Securities Case. Proceedings of the Northeast Business & Economics Association, 79-86. Retrieved February 3, 2013, from Academic Search Premier database.