It has been reported that a bankrupt hedge fund is in talks with Goldman, Sachs & Co., to recoup losses it sustained in the “Timberwolf” securities deal.
invested approximately of $100 million in a $1 billion security Goldman packaged and sold as “Timberwolf” in Q1 2007. If you have been following the Goldman Sachs Senate Subcommittee investigations this week you would have heard that this deal was criticized in in-house e-mails. Namely, “Boy, that Timberwolf was one [$%&!] deal.”
The hedge fund is said to have lost approximately $56 million on the Timberwolf security. Goldman has not yet commented on its talks with the hedge fund.
As reported earlier on this blog, the Securities and Exchange Commission filed a lawsuit April 16 against Goldman alleging that the firm secretly created investments designed to fail while a hedge fund manager, John Paulson, who helped package the deal, was betting against them.
As compliance professionals, this should stand as an acute reminder to train employees on the importance of using discretion in drafting and sending out e-mails and other electronic communications (among a whole host of other compliance related issues!). While often tagged as a best practice, firms should implement an electronic communications (i.e., emails and instant messages) monitoring and review system. People tend to forget that once an electronic communication is put out in cyberspace it can and may be used against (or for) you. While training and monitoring can never stop someone from committing a fraud or potential fraud (and this is not to imply that Goldman is guilty in anyway — I’ll leave that decision to the courts!), it can certainly help catch it before it grows into something much bigger.
