New York prosecutors have asked Goldman Sachs to explain its behavior in the run-up to the financial crisis, the latest investigation that has cast a pall over the reputation of the largest U.S. investment bank.
Goldman Sachs Group Inc. now faces probes by several government authorities into derivatives trades it executed in late 2006 and 2007. On Thursday, sources close to the matter said Goldman received a subpoena from the Manhattan district attorney, who joins the Justice Department and the Securities and Exchange Commission in examining Goldman's actions.
Separately, New York Atty. Gen. Eric Schneiderman is investigating Goldman as part of a broader probe into the mortgage operations and securitization practices of seven banks. A source familiar with the situation said Schneiderman's office met Goldman executives and attorneys in the last two weeks.
The probes follow a scathing report by U.S. lawmakers that cast Goldman as a central villain of the financial crisis and accused it of misleading clients about mortgage-linked securities.
The report by a Senate subcommittee, headed by Carl Levin (D-Mich.), said Goldman offloaded much of its subprime mortgage exposure to unsuspecting clients as the market for such securities was starting to tank. In some cases, the bank dragged its heels when clients wanted to get out of their losing positions, according to the report.
The investigations do not imply that the bank or its top executives will face criminal or civil charges, but they display a growing interest by prosecutors to build a case against Goldman, legal experts said.
"They have subpoena power to get certain records, correspondence, emails, and they're trying to find out every last detail that could prove fraud," said Peter Berlin, an attorney who represents defendants in white-collar cases.
The Manhattan district attorney, Cyrus Vance, is not seeking new documents, according to one source, but wants to ask further questions about the information contained in the Levin report.
In a statement, Goldman said: "We don't comment on specific regulatory or legal issues, but subpoenas are a normal part of the information request process and, of course, when we receive them we cooperate fully."
Both Levin's and Vance's offices declined to comment Thursday.