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Goldman Sachs Charges Up to Justice Department, Levin Says

Goldman Sachs CEO Lloyd Blankfein
Blankfein, seen here as he testified at a Senate Homeland Security and Governmental Affairs subcommittee hearing on Wall Street and the financial crisis, in Washington, April 27, 2010. Photographer: Chris Kleponis/Bloomberg

The U.S. Justice Department and regulators will have to determine whether employees and executives of Goldman Sachs Group Inc. violated any laws when they traded securities tied to the housing market and testified to Congress about the transactions, Senator Carl Levin said.

The Michigan Democrat, who released the findings of a two-year inquiry into the 2008 financial crisis yesterday, said today in an interview with Bloomberg Television’s “Street Smart with Carol Massar and Matt Miller” that he wanted to send the report to federal prosecutors and the Securities and Exchange Commission. Lawmakers don’t have the authority to declare whether the activities were illegal, he said.

“That is not for Congress to determine whether or not a crime was committed or whether or not he violated the security laws,” Levin said, referring to Goldman Sachs Chief Executive Officer Lloyd Blankfein. “That is for the Justice Department and that is for the SEC to make those determinations.”

Levin, who is chairman of the Permanent Subcommittee on Investigations, said he also wants to forward all of the testimony that Goldman Sachs executives gave before his panel so the Justice Department can determine whether any statements constitute perjury.

“We’re not going to make the determination as to whether or not he committed perjury,” Levin said, after explaining that he thought Blankfein “attempted to mislead the Congress and I believe they did mislead their clients in very significant ways.”

‘Truthful and Accurate’

In a statement, Goldman Sachs denied that it had misled anyone about its activities. “The testimony we gave was truthful and accurate and this is confirmed by the subcommittee’s own report,” Goldman Sachs spokesman Lucas van Praag said yesterday.

Levin doesn’t have the power on his own to formally refer the report’s allegations to federal authorities. The subcommittee has a process for making such referrals that requires Levin to obtain the support of the senior Republican on the panel, Tom Coburn of Oklahoma.

Levin is going to recommend that the subcommittee make formal referrals, though he has not done it yet, staff members said.

Coburn Statement

Coburn issued a statement today saying committee members have yet to decide whether to make formal referrals.

“There has been a lot of speculation about the nature of any possible referrals that may result from our financial crisis investigation,” Coburn said. “At this point, no final decisions have been made regarding this issue.”

The 640-page report issued yesterday by the subcommittee found that Goldman Sachs peddled mortgage-related securities to its clients while failing to disclose that the firm had bet that those instruments would lose value.

The report also said the firm acted against its clients’ interests by attempting to profit more generally from the housing-market decline.

During a subcommittee hearing last year, Blankfein testified that Goldman Sachs never bet against its clients for its own profit.

The bipartisan report also examined the role of credit-rating firms in the meltdown, lax oversight by Washington regulators and the drop in lending standards that fueled the mortgage bubble and ultimately caused hundreds of bank failures.

-- With assistance from Phil Mattingly in Washington. Editors: Lawrence Roberts, Maura Reynolds

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