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Goldman Sachs Faces SEC Deputy Enforcement Director in Subprime Fraud Case

Lawyers for Goldman Sachs Group Inc. will face Lorin Reisner, the deputy director of enforcement for the Securities and Exchange Commission, in the agency’s lawsuit over the bank’s use of subprime mortgage-backed securities.

Reisner yesterday filed a one-sentence “notice of appearance” in federal court in Manhattan, indicating he will participate in the case. Reisner, who worked at the law firm Debevoise & Plimpton LLP before joining the SEC last year, was an assistant U.S. attorney in New York from 1990 to 1994.

“It sends a strong message that the enforcement division is both stepping up to the plate and standing behind its case,” said Jacob Frenkel, a former SEC enforcement division attorney, who isn’t involved in the Goldman lawsuit. “It’s unusual, but it’s a logical and brilliant move when you have skilled trial lawyers who are part of senior management who step forward.”

Goldman Sachs, which reported record earnings last year, and a company executive director, Fabrice Tourre, were sued by the SEC in April for misleading investors in mortgage-linked securities.

The SEC alleged the firm wasn’t forthcoming about the role that a hedge fund, Paulson & Co., played in selecting and betting against the instrument. New York-based Goldman Sachs has denied wrongdoing.

Goldman Sachs was negotiating to hire the Paul, Weiss, Rifkind, Wharton & Garrison LLP law firm to help defend it in the case.

Negotiations Terminated

The discussions, which started this month, were terminated last week and Goldman Sachs doesn’t plan to hire another law firm instead, a person briefed on the matter said, speaking anonymously because the talks were private.

Lucas van Praag, a spokesman for Goldman Sachs, confirmed on May 17 that the firm isn’t hiring Paul, Weiss. Van Praag didn’t immediately return a call or e-mail after regular business hours seeking comment on yesterday’s filing by the SEC.

John Heine, a spokesman for the SEC, declined to comment.

According to the complaint, Goldman Sachs created and sold collateralized debt obligations linked to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that Paulson & Co. helped pick the underlying securities and bet against the vehicles.

As a prosecutor, Reisner handled cases involving financial crimes, public corruption, organized crime, narcotics and firearms offenses, the SEC said last year in a statement. He had been a litigation partner at Debevoise since 1996, where he focused on white-collar crime and internal investigations.

The case is Securities and Exchange Commission v. Goldman Sachs, 10-cv-03229, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David Glovin in New York federal court at

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