SEC divided on vote to file Goldman lawsuit
 Republican SEC commissioners Kathleen Casey, left, and Troy Paredes disagreed with Chairman Mary Shapiro on filing the case. (Andrew Harrer - Bloomberg) |
Washington Post Staff Writer
Friday, April 23, 2010
Behind closed doors, the two Republican members of the Securities and Exchange Commission sharply questioned senior investigators last week about whether the evidence they had assembled was strong enough to file a fraud case against Goldman Sachs, according to current and former SEC officials familiar with the matter.
Commissioners Kathleen L. Casey, a former top Capitol Hill aide, and Troy A. Paredes, a wunderkind law professor, were skeptical that the evidence showed that Goldman had misled its clients because the investors were big, sophisticated firms who should have known what they were doing. The two commissioners warned that if the SEC erred by filing a flawed case, it could seriously harm the agency's reputation, and voted against approving it.
But SEC Chairman Mary Schapiro, an independent appointed by President Obama, joined two Democrats on the commission, Elisse B. Walter and Luis Aguilar, to authorize the suit, arguing that it was important to hold Goldman responsible for improper conduct, even if the case had difficulties.
None of the commissioners would comment for this story, and the details of their deliberations are not public. The internal debate, however, underscores the challenges that face the SEC as it prosecutes its case against Goldman.
Lawyers said that a divided vote over a lawsuit has no bearing in court. But former SEC chairman Harvey Pitt said the disclosure of the divide could harm the agency's reputation. "The split might be seen as having political overtones," Pitt said. "It allows people to speculate on why things were done the way they were done. I think that ultimately hurts the agency's credibility."
But SEC Chairman Mary Schapiro, an independent appointed by President Obama, joined two Democrats on the commission, Elisse B. Walter and Luis Aguilar, to authorize the suit, arguing that it was important to hold Goldman responsible for improper conduct, even if the case had difficulties.
None of the commissioners would comment for this story, and the details of their deliberations are not public. The internal debate, however, underscores the challenges that face the SEC as it prosecutes its case against Goldman.
Lawyers said that a divided vote over a lawsuit has no bearing in court. But former SEC chairman Harvey Pitt said the disclosure of the divide could harm the agency's reputation. "The split might be seen as having political overtones," Pitt said. "It allows people to speculate on why things were done the way they were done. I think that ultimately hurts the agency's credibility."
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