AP Source: Goldman Sachs subpoenaed

June 2, 2011 - 12:28 PM

NEW YORK (AP) — Goldman Sachs Group Inc. was subpoenaed by the Manhattan District Attorney's office over the investment bank's activities leading up to the financial crisis, a person familiar with the matter told The Associated Press.

A spokeswoman for Manhattan District Attorney Cyrus Vance Jr. said the office had no update regarding Goldman. Goldman spokesman David Wells said the company doesn't comment on specific regulatory or legal issues, but cooperates when it receives a subpoena. A subpoena is a request for information and doesn't mean that a company has done anything wrong.

Shares of Goldman initially fell nearly 2 percent Thursday after Bloomberg News reported that the bank had been subpoenaed. By midday, the stock was down about 1 percent to $134.47 a share, its lowest level since last July.

"This is just another thorn in Goldman's side," says Peter Henning, a professor of law at Wayne State University in Detroit, referring to the attention Goldman has gotten from government and the media since the financial crisis began three years ago. The government's request for information from Goldman is the first stage of an investigation, Henning says.

The subpoena follows the April release of a 639-page Senate report that showed Goldman had steered investors toward mortgage securities it knew would likely fail.

The report, which was done by a Senate panel investigating the financial crisis, found that Goldman marketed four sets of complex mortgage securities to banks and other investors. The report said the firm failed to tell the banks and investors that the securities were very risky, secretly bet against the investors' positions and deceived the investors about its own positions to shift risk from its balance sheet to those of investors'.

Sen. Carl Levin., D-Mich., who heads the panel, said at the time the report was released that he planned to convey findings to the Justice Department and the Securities and Exchange Commission for possible further investigation.

Sen. Levin's spokesman, Bryan Thomas, said the senator had no comment.