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Barry Ritholtz

Why Goldman Sachs Keeps Losing in Court

The legal charges against former Goldman Sachs computer programmer Sergey Aleynikov keep falling apart.
They guy on the left took the jewelry box, left the jewels behind.

They guy on the left took the jewelry box, left the jewels behind.

Photographer: Jin Lee/Bloomberg

Time to dust off the old juris doctor sheepskin, and wonder aloud about the legal advice that Goldman Sachs has gotten over the past few years. It's a question worth asking as I review the firm's recent history of unforced errors in the courtroom. The most recent case in point: the collapsing prosecution of former Goldman computer coder Sergey Aleynikov.

There's a pattern here, and we can discern its outlines by starting with the “Fabulous Fab” Tourre-Abacus case. This was a simple fraud case involving Securities and Exchange Commission rule 10B-5 governing "manipulative and deceptive practices." Any rookie lawyer could have looked at the facts concerning the sale of a monumentally complex security and recommended a quick settlement involving a modest fine. Instead, Goldman received what I can only surmise was some fairly awful advice, leading it to fight the allegations tooth and nail. I don’t know if it was a new legal team or simple exhaustion that led to an about-face, but Goldman settled in 2010 for a whopping $550 million fine and a lot of embarrassment.