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Reputation of SEC's Khuzami is on the line vs. Goldman | McClatchy

WASHINGTON -- In the painful months following Wall Street's flirt with financial ruin, no big player has yet been punished. Robert Khuzami's reputation now rests on Goldman Sachs becoming the first.

The enforcement chief at the Securities and Exchange Commission has spent his first year remaking his office, which was chock full of top managers, but light on investigators.

When Khuzami arrived last year, he inherited a demoralized agency, widely ridiculed as the most ineffectual of federal regulators. Faced with salary restrictions, the agency had promoted top-level people to administrative positions at a pace that left the agency top heavy and without enough cops on the beat.

Khuzami set out to change that, leaving top salaries in place but forcing those administrators out of desk jobs and back into investigations.

His office has prosecuted private equity firms for alleged pay-to-play activity in the state of New York, and late last year brought a high-profile insider trading case against Galleon Management, a large hedge fund that invests on behalf of the ultra wealthy.

But that pales next to what is ahead for the SEC in taking on Wall Street's most influential and politically connected player.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Sun Apr 18th, 2010 at 11:46:30 AM EST
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FT.com / World - Angry Goldman lambasts fraud charges
Documents obtained by the Financial Times throw new light on the rocky relationship between Goldman Sachs and the US Securities and Exchange Commission during the 20-month probe that led to last week's fraud charges against the Wall Street bank.

The frayed mood between the bank and the regulators might explain the SEC's decision to file civil charges against Goldman on Friday without warning the bank, as well as the two sides' lack of settlement talks before last week's move.

In a 40-page document written in September last year in response to the SEC's initial accusations, Goldman and Sullivan & Cromwell, its lawyers, say the authorities' case is riddled with "fatal deficiencies" and criticises the regulators for laying blame with the benefit of "perfect hindsight".
"There is no basis in the law, the record or common sense for such charges," it says.

In a separate document, sent to the SEC a few days later, Goldman refers to "open and robust" discussions with staff of the commission - a glimpse of the tough behind-the-scene talks that went on from July last year when the regulators formally informed the bank they wanted to press charges.

"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Mon Apr 19th, 2010 at 09:07:45 AM EST
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