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Goldman Sachs must face class action over conflicts of interest, risky mortgages
By Jonathan Stempel
7 April 2020·2-min read

FILE PHOTO: A sign is displayed in the reception of the Sydney offices of Goldman Sachs in Australia
By Jonathan Stempel

NEW YORK (Reuters) - Goldman Sachs Group Inc must face a shareholder class action accusing the bank of hiding conflicts of interest, including behind-the-scenes dealings with a prominent hedge fund manager, when creating risky subprime securities before the 2008 financial crisis.

In a 2-1 decision on Tuesday, the 2nd U.S. Circuit Court of Appeals said Goldman failed to overcome a presumption that shareholders relied on its alleged misstatements, including that client interests "always come first" and "integrity and honesty are at the heart of our business," when buying the bank's stock.

The Manhattan-based court also rejected Goldman's argument that allowing class actions based on "general" statements about companies' businesses would turn securities fraud claims into "a form of investor insurance," exposing companies to a flood of baseless litigation.

"We are not blind to the widespread understanding that class certification can pressure defendants into settling large claims, meritorious or not, because of the financial risk of going to trial," Circuit Judge Richard Wesley wrote. "But our law already beats back this parade of horribles."

Goldman spokeswoman Maeve DuVally declined to comment. Lawyers for the shareholders did not immediately respond to requests for comment.

The case arose from several collateralized debt obligations including Abacus 2007 AC-1, the centerpiece of a U.S. Securities and Exchange Commission probe that led to a $550 million Goldman civil settlement in 2010.

Goldman admitted it was a "mistake" not to disclose that it had allowed hedge fund manager John Paulson to choose some mortgages to include in Abacus, and that he bet against the CDO through short sales. Paulson made a roughly $1 billion profit at the expense of the CDO investors.

The lawsuit led by three pension plans said Goldman fraudulently overstated its ability to manage conflicts, and that shareholders from Feb. 2007 to June 2010 lost more than $13 billion as Goldman's misconduct became known.

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Being Transgender at Goldman Sachs
How Maeve DuVally, an employee in the bank’s buttoned-up communications department, became herself at work.

Maeve DuVally of Goldman Sachs.Credit...Gabriella Angotti-Jones for The New York Times

By Emily Flitter
June 21, 2019
Goldman Sachs’s trading floors are vast rooms crammed with rows of tightly packed workstations, four monitors for every trader. The two-by-two grids tower over and swallow up their users, so that the only way someone can be identified from across the room is by the decorations affixed to the tops of the screens.

At one desk, a toy vulture peers down, held in place by wire feet. A stuffed eagle in a sports jersey sits atop another monitor. Flags: Brazil, Canada, Norway. A lacrosse stick juts out like a severed head on a pike.

One Wednesday in May, Maeve DuVally walked the rows in a pair of low-heeled black leather pumps, her ankles wobbling slightly. Her pink lipstick popped against her blonde hair, dark jacket and the pearls at her neck. Her eyelashes were full and inky.

Ms. DuVally, a spokeswoman for the bank, passed the flags and the lacrosse stick. She passed the vulture and the eagle. She passed one desk where a little tented card floated at eye level, bearing the Goldman Sachs logo, a rainbow-colored rectangle and the word “Ally.”

She approached the doorway to a senior executive’s office and leaned in. Its occupant, a man in gray dress pants, looked up at her quizzically.

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“Hello,” she said, and waited.

“Maeve DuVally,” she said, after a moment.

“Hello,” the man said, blinking.

ImageMs. DuVally, a managing director in the Goldman communications department, on her first day as Maeve.
Ms. DuVally, a managing director in the Goldman communications department, on her first day as Maeve.Credit...Gabriella Angotti-Jones for The New York Times
“Michael DuVally,” Ms. DuVally said. “I’ve changed genders.”

“I did not recognize you!” the man said.

Ms. DuVally explained that she had not yet gotten around to telling all of her colleagues of her decision to come out as transgender. She told a story: One person she had shared the news with was a fellow member of a Goldman working group; he had replied, “Great — now we have another woman on the committee.” Ms. DuVally and the man in the office laughed at that. Then she said goodbye, and that she was looking forward to seeing him again at a meeting later that day. The man said softly, “New experiences for all of us.”

Wall Street wakes up (a bit)
Wall Street has had a hard time kicking its reputation as a dismal place for people who aren’t straight white men. Gone — mostly — are the days when investment banks would pick up strip-club tabs and female employees were harassed as a matter of course. It may be harder now to find a trader nicknamed “Porno Ray” (he worked at Bear Stearns), and the Volcker Rule has taken the swagger out of the guys who used to walk away from a day’s work with enough cash to buy a new Lamborghini — or acted like it, anyway. Despite these advances, a fleece-vested bro culture remains, and there are still plenty of obstacles to success for minorities and women.

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The group photo of Goldman’s 2010 managing director class, for example, is a sea of men with a sprinkling of women at the front. Ms. DuVally was in that class; she keeps the photo, in which her face appears above a suit and tie, on her desk. When she arrived for work as Maeve on the Tuesday after Memorial Day, only the second employee to use official channels to manage her transition at Goldman, she was testing just how tolerant and accepting a big American bank could be.

Goldman presents itself as being ahead of the curve on lesbian, gay, bisexual and transgender issues. It has offered health and relocation benefits to same-sex couples since 2000. It expanded its employee medical plan to cover gender reassignment surgery and hormone therapy in 2007, years ahead of JPMorgan Chase and Citigroup. This year, Goldman’s former chief executive, Lloyd Blankfein, received the Ally Award from the Lesbian, Gay, Bisexual & Transgender Community Center, a 35-year-old institution that supports the L.G.B.T. community in New York City.

Employees can choose to display posters and cards in their work areas that identify them as allies dedicated to “encouraging the use of inclusive language” and “mentoring and being a resource for L.G.B.T. people.” A giant rainbow pride flag is affixed to a window high above the equities trading desk, beside the office of R. Martin Chavez, the co-head of Goldman’s securities division and the firm’s most senior openly gay executive.

Goldman still has problems. On June 5, William Littleton, a former vice president who is gay, sued the bank for discrimination. He said his direct supervisors had failed to act when other bank employees undermined him, including when one colleague explained that he had been kept off a conference call because he sounded “too gay.” One supervisor, he said, had belittled him with comments like, “You look so Miami today.”

A shelf decorated with trophies and books in Ms. DuVally’s office.
A shelf decorated with trophies and books in Ms. DuVally’s office.Credit...Gabriella Angotti-Jones for The New York Times
There is one other Goldman employee who has formally transitioned at work (that is, involved the human resources department, changed names, made an announcement and so on): Katie Krasky, an associate on Goldman’s regulatory policy team. She was hired in February 2017, told her bosses that June of her intention to transition, and debuted her new name and pronouns that October.

Ms. Krasky said in an interview that she had not known she was a pathbreaker. She assumed there must have been other employees like her. “While I wasn’t able to find or connect with anyone who identified as transgender during that process, I felt it was probably foolish to assume I was the first, just because of the math,” she said. “It didn’t seem like it was very likely.”


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A 2017 study published in the American Journal of Public Health estimated that 0.39 percent of adults in the United States are transgender. If that proportion were applied to Goldman’s ranks, there would be as many as 140 transgender employees among the bank’s 36,000.

Goldman’s head of human resources, Dane Holmes, said Ms. DuVally and Ms. Krasky weren’t the only two transgender employees at Goldman, they’re just the only ones who have formally transitioned while at work. “There’s a lot of fluidity around how you think about sexual identity,” Mr. Holmes said. “We’ve had people who came into the firm at some different stages of their transition.”

One employee, Mr. Holmes said, had a name that befitted both a man and a woman, so she simply transitioned without any official announcement. “There are certainly people who work here who are transgender who have chosen not to self-ID,” he said. He declined to say exactly how many.

‘I never, on a conscious level, thought that there was anything I could do’
In the Goldman Sachs communications department, Ms. DuVally and her colleagues are concerned to an extreme with the stories they tell, and with what they are and are not allowed to say. Recently, while visiting the bank, I made an idle comment about Goldman’s relaxed new dress code. Ms. DuVally replied, “You can’t put this in your story, but my assistant wears jeans every day now.” Another co-worker, who has worked with Ms. DuVally for years, told me he had never seen her happier. A few hours later, he emailed to say he could not be quoted saying that.

Ms. DuVally’s old suit closet at Goldman Sachs.
Ms. DuVally’s old suit closet at Goldman Sachs.Credit...Gabriella Angotti-Jones for The New York Times
Ms. DuVally, who has worked at Goldman for 15 years, is 58 and twice divorced, with three children. In an interview, she said that she had been unhappy for most of her life. “I drank too much in the past, and I was extremely self-critical,” she said. “In retrospect, I can say now I didn’t like the fact that I was a male.”

Before she started dressing in women’s clothing, she said, she could not remember looking at herself in the mirror and feeling anything other than disgust. “I believe from a very early age I’ve wanted to be a woman,” she said. Somehow, she added, the sense was both vague and strong. “I did not like anything that was masculine about me. But I never, on a conscious level, thought that there was anything I could do about that.”


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Last year, Ms. DuVally said, she discovered that she liked wearing women’s clothing. She did so on weeknights, at her apartment on the Upper East Side. She found a support group for transgender people and made new friends.

At first, the thought of expressing herself in this way at Goldman did not cross her mind. But then, beginning late last year, she occasionally wore light makeup to work. Sometimes she would appear before her colleagues wearing bright red or pink lipstick. A few nights before Thanksgiving, she wore makeup along with a tuxedo to a black-tie event, where she mingled with other bank employees and journalists.

Ms. DuVally saw herself as living two lives throughout the fall and winter. One, where her new friends knew her as Maeve, was exciting and filled with a happiness she had never before experienced. The second, her life at work, where she had to keep being Michael, was grinding away at her.

In December, on the mornings she went to work from yoga class, she began showing up in flowy yoga pants and boots with heels. She would ride the two elevators it took to get to her office on the 29th floor and then change into a suit. The form of Michael felt stifling. Sometimes she couldn’t even last the whole day downtown in the unnatural feeling of her men’s clothing. She’d get dressed in women’s clothes and makeup while still at work, in preparation to leave at the end of the day.

“I believe from a very early age I’ve wanted to be a woman,” Ms. DuVally said.
“I believe from a very early age I’ve wanted to be a woman,” Ms. DuVally said.Credit...Gabriella Angotti-Jones for The New York Times
Then, in March, an invitation went out to the bank’s employees: Goldman’s L.G.B.T. network was hosting a panel on “how to be stronger allies to the transgender and gender non-conforming community.” Ms. DuVally showed up to the event, in Goldman’s auditorium, in a wig and makeup, and afterward she introduced herself to some bank employees.

Ms. DuVally found the event encouraging. One co-worker, who watched it remotely from London, took copious notes and emailed them to the communications group afterward. Everyone who attended received laminated cards explaining correct pronoun usage. Ms. DuVally realized, she said, that it was time to come out as transgender at Goldman.


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The bank is a place of rigid protocols, and she knew her debut as Maeve would require weeks of preparation. After Ms. DuVally informed her bosses of her decision, a human resources specialist was assigned to handle her case. Ms. DuVally got new business cards, a new ID badge, a new email address. She got a new profile in Goldman’s internal directory, so that when she joined work discussions digitally, the meeting software would display to all participants her smiling, feminine face.

A co-worker of Ms. DuVally’s in London used her access to the bank’s employee website to change Ms. DuVally’s name in past internal articles from Michael to Maeve. The bank’s security team let her into their offices to have her new-look photograph taken at a time when no one she knew and hadn’t told about her transition would chance upon her.

Ms. DuVally and her colleagues in the communications department knew her decision would be of interest to journalists, and they discussed how to keep it a secret until the last minute. In mid-May, Ms. DuVally attended a happy hour Goldman hosted for reporters at a bar overlooking New York Harbor. She was still calling herself Michael, still dressed as a man. Tucked into her jacket, out of sight for most of the evening, was a large, bubblegum-pink wallet. I noticed it when she took it out at the bar, and Ms. DuVally hurried me away from the group. Only out of earshot, and after stipulating that it was a secret, did she explain why.

In the corporate sphere, Ms. DuVally imagined that her transition would be a binary thing — that a switch would be flipped. But word was getting out. People outside her immediate circle learned of her transition plan. On May 22, when I interviewed Asahi Pompey, Goldman’s global head of corporate engagement, she gushed about the name “Maeve.” Later that day, when I told Ms. DuVally, she was surprised Ms. Pompey was aware of it.

Ms. DuVally’s new ID.
Ms. DuVally’s new ID.Credit...Gabriella Angotti-Jones for The New York Times
‘Welcome, Maeve’
On May 28, Ms. DuVally arrived at Goldman shortly after 7 a.m. in an outfit assembled from items she’d bought at Theory: A white shirt with thin, black, vertical stripes that fanned out at the waist, slim black slacks and a black jacket. On the 29th floor, a colleague greeted her: “What did you get up to this weekend?”

“Oh, manicure, pedicure, eyelash extensions,” Ms. DuVally said. “You know.”

“Honestly, I should have done all that stuff, too,” the woman said.

Everyone seemed to be focusing more on clothes, nails, hair and the other aspects of the traditional female corporate uniform than they might have on a less consequential day. It didn’t read as shallow; it was just the easiest way to connect with Ms. DuVally, to convey warmth and support.

Andrew Williams, a Goldman spokesman, stuck his head into Ms. DuVally’s office soon after she arrived. “Welcome, Maeve,” he said, smiling. Ms. Krasky sent an email: “I’m so glad to know the big day is finally here.” Another woman hugged Ms. DuVally in the hallway, saying, “Oh, wow, you look gorgeous.”

“I’ve been hugging a lot of people,” Ms. DuVally said. “Before I decided to come out, I don’t think I had ever hugged anyone at work.”

That first day, Ms. DuVally discovered a secret the rest of the women on the 29th floor already knew: The women’s bathroom had a cushioned leather bench. She used the space for the first time, bringing her purse with her to check her makeup.

There were hiccups. The badges Goldman’s security apparatus printed out for her visitors still referred to her as Michael, and at one point, Mr. Williams accidentally used the wrong pronoun. Ms. DuVally said she had prepared herself for little slips like those. She knew some younger transgender people who got angry every time someone misgendered them, she said, but she had decided not to let it bother her too much.

She received gifts, including a makeup bag. The commodities trading team sent flowers, a tightly packed cluster of white orchids. “During this important point in your life, we wanted to let you know how happy we are for you,” a card read. “We are full of genuine admiration and respect for your bravery and choice to be happy.”

On the evening of June 6, Ms. DuVally, in dress slacks and a soft blue blouse, was one of a dozen Goldman Sachs volunteers at the Children’s Museum of Manhattan’s Pride Night. They looked on as 30 or so kids raced around the museum after hours, splashing in its water exhibit and painting a giant pride flag on a canvas spread across the floor.

Like many of the other volunteers, Ms. DuVally did not know exactly what to do. She eventually sat down at a child-sized table arrayed with paper and art supplies. A girl of perhaps 6 sat down across from her, and they both began to draw. The girl wrote her name, “Amelia,” in light blue. Ms. DuVally chose a different color — blue, red, pink, green and crimson — for each of the letters in MAEVE.

© 2021 The New York Times Company

Goldman Sachs (GS) to Face Litigation Over 1MDB Scandal

Zacks Equity Research — Zacks

Jun 29, 2021 6:57PM EDT

The resolution of the multibillion-dollar 1Malaysia Development Bhd (1MDB) scandal, in which Goldman Sachs GS is engulfed, seems far from over. The U.S. District Judge, Vernon Broderick, recently declined requests from the company, its former CEO, Lloyd Blankfein, and former chief operating officer, Gary Cohn, to dismiss the lawsuit filed by its shareholders. Nonetheless, the bank’s former co-CEO, Harvey Schwartz, has been dropped from the case. The news was reported by Reuters.

Shareholders, being led by the Swedish pension fund, Sjunde AP-Fonden, had sued Goldman in late 2018, alleging it of conning them about the firm’s work with the sovereign wealth fund, arranging three bond offerings raising $6.5 billion and garnering fees estimated at $600 million. Goldman has rebuffed any accountability in the scandal and put the blame on a former partner, Tim Leissner, who had pleaded guilty and collaborated with the government.

Authorities have claimed that the sovereign wealth fund’s officials and allies plundered the bond proceeds for extravagance and to finance Hollywood films, while Goldman’s bankers greased palms of Malaysian and Abu Dhabi officials to procure the 1MDB business.

The judge remarked that the shareholders had appropriately asserted that numerous statements made bythe bank and its top executives on the 1MDB case were deceptive and unambiguous. Among the examples specified were Blankfein’s comment in a 2018 interview that he was “not aware” of any red flags, as well as the chairing of a committee by Cohn, approving Goldman’s 1MDB deals.

Broderick remarked, “Taking these allegations as true, I find it unlikely that Blankfein would not have been aware of any warning signs about 1MDB prior to the scandal breaking.”

Goldman had argued that the shareholders had not portrayed that the misstatements were crucial to investors, were fake or neglected information, or that the bank planned to delude shareholders or induced their losses.

Albeit the judge said that Goldman’s statement of being “dedicated to complying fully with the letter and spirit of the law, rules and ethical principles that govern us” would ordinarily be “puffery”, thereby exempting its claims from being misleading, he furthered by saying that other courts have found such statements to be subject to legal action when “paired with unlawful behavior or other actionable statements.”

Last year, the bank entered into the long-awaited settlement with the Malaysian Government. The terms included payment of $2.5 billion as penalties. Also, Goldman had guaranteed that the authorities would receive $1.4 billion from the proceeds of assets, which have been seized globally as those were related to the 1MDB scandal.

Earlier in May, 1MDB and SRC International Sdn Bhd filed lawsuits against JPMorgan JPM and Deutsche Bank DB to recoup assets worth more than $23 billion.

Bottom Line

Although Goldman has resolved quite a few litigation issues, it still faces probes and queries from a number of federal agencies, and a few foreign governments for businesses conducted during the pre-crisis period. As a result, the company’s legal expenses are expected to remain elevated, which might partially impede its bottom-line growth in the near term.