Paulson: On the hook?

By Lawrence Delevingne

Wed Apr 21, 2010

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Weighing Paulson & Co.’s legal liability in the SEC’s Goldman Sachs case, including potential multi-billion dollar RICO claims from losing investors.

Paulson & Co. Inc. wasn’t charged in the Securities and Exchange Commission’s allegations of securities fraud against Goldman Sachs, but the powerful hedge fund is still attracting unwanted attention for helping shape a mortgage-backed security in 2007 that made it $1 billion—and cost other investors the same amount.Some legal experts believe that Paulson could still be sued for its role in creating and betting against a synthetic collateralized debt obligation called ABACUS 2007-AC1, including Racketeer Influenced and Corrupt Organizations Act claims potentially worth billions of dollars. For now, Paulson appears safe. SEC enforcement chief Robert Khuzami recently said, according to the Wall Street Journal, that the hedge fund was not charged because only Goldman was responsible for representing the security to investors.And Paulson has said there’s been no notice of impending civil litigation...

ISSN: 2151-1845 / CDC10004H

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