Goldman Sachs Group Inc., the most profitable bank in Wall Street history, told Japanese clients the collateralized debt obligation at the center of a Securities and Exchange Commission suit wasn’t sold in the country.
Hiroko Matsumoto said, “We are explaining to our clients in Japan that the synthetic CDO in question was not sold in Japan,” a Tokyo-based Goldman Sachs spokeswoman Matsumoto, who confirmed the contents of the letter, said Japanese clients began receiving it earlier this week. She declined to comment on their responses.
The SEC sued Goldman Sachs on April 16, alleging that the New York-based company misled investors in a collateralized debt obligation, called Abacus 2007-AC1. U.K. Prime M
inister Gordon Brown has asked for Britain’s Financial Services Authority to start an inquiry, as the ramifications of the suit affect the company globally.
The SEC said that in early 2007, as the U.S. housing market teetered, Goldman Sachs created and sold the CDO, which was linked to subprime mortgages, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicle. The hedge fund wasn’t sued by the SEC.
Goldman Sachs in its letter to Japanese clients said the SEC suit is “completely unfounded in law and fact.”
The bank said yesterday its net income rose 91 percent to $3.46 billion, or $5.59 per share, in the three months through March.