Latest Legal News: Did Goldman Help Greece Fool Bond Investors?

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Goldman Helped Greece Sell Bonds Without Disclosing Swap It Arranged


In 2002, Goldman Sachs (GS) arranged a currency swap that raised $1 billion for Greece off its balance sheet. According to a review of prospectuses as part of an investigation by Bloomberg, six of ten bond issues that Goldman later helped Greece sell did not disclose the swap; prospectuses for the other four couldn't be obtained.If the swap was material information, failure to disclose it could constitute fraud. The swap seems material; it apparently improved the appearance of Greece's budget and debt, and enabled Greece to meet a target to stay within the euro.

If failure to disclose material information in the prospectuses was fraud, could Goldman be on the hook for it? It's a hard case to make because prosecutors would have to show Goldman was "knowingly hiding risk," and "knew or had reason to know" the prospectuses were misleading as a result.

On the other hand, you'd think that establishing Goldman knew about the swap would be easy, since the firm arranged it, and you'd think Goldman would understand the swap's significance in the marketplace, given its market sophistication. One thing's for sure -- the bond deals were lucrative for Goldman. Since 2002, it cleared about $1 billion in fees for underwriting Greek government bonds.

Advertiser Beware! Corporations Marketing Via Social Media Must Be Mindful of New FTC Guidance

In December, the Federal Trade Commission revised its decades-old guidance on using endorsements and testimonials in advertising to reflect the changing social media landscape. According to the New York Law Journal,the FTC is likely to enforce the new guidance by going after the advertising corporations, rather than the bloggers. The new guidance requires disclosure of corporate "sponsorship" of bloggers and other network marketers, and more chillingly, potentially holds advertisers responsible for false statements sponsored bloggers make about the advertised product, even if the sponsors didn't authorize the false statement.

Lawyers Scamming Desperate Homeowners

The ABA Journal reports that California, one of the epicenters of the housing market meltdown, has seen a surge in complaints about lawyers taking fees from desperate homeowners facing foreclosure and doing nothing to help them. Thirty complaints a day are coming in, 400+ attorneys are already under investigation, 15 have been suspended or resigned, and many more are expected to lose their licenses. This parasitical scamming reinforces all the anti-lawyer stereotypes. Thanks, guys.

And in the Business of Law...


Greenberg Traurig reported flat profits and a slightly smaller headcount despite picking up lots of laterals in 2009; at Gibson Dunn both gross revenue and profits per partner increased; and Big Law firms may regret paying newly hired associates reduced salaries ($80k) to work public interest jobs until business picks up. Apparently, these deferred associates like public interest law, have adjusted to life on less than a Big Law salary, and are trying to figure out how to avoid their sponsoring firms when they call. I doubt the firms have much to worry about, however. Public interest lawyers generally make less than $80,000 -- 15 years experience has a median salary of $69,000 and median entry-level pay is $41,000. Once the firms stop paying for the positions, it's not clear how many of the jobs will remain. If the choice is no job, $41,000, or a firm job, I'll bet most of these debt-ridden new law grads will gratefully head back to the firms.
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