Blankfein attacks 'political' SEC case

Lloyd Blankfein yesterday attacked the Securities & Exch-ange Commission's fraud charges in telephone calls to important clients as Goldman escalated its campaign to halt damage to the firm's reputation.

One person who received a call from the Goldman chief said he was told the regulator's case against the bank was politically motivated and would ultimately "hurt America". Mr Blankfein mounted the campaign to bolster the confidence of its business partners in the wake of the SEC charges that the bank sold investors a security that was designed to fail.

In the conversations with private equity executives and others, Mr Blankfein left clients with the impression he was eager to fight the charges in court. The SEC has requested a jury trial. "He was very aggressive," said one person who got a call from Mr Blankfein. "He feels that the government is out to kill them, that they are under attack and the whole thing is totally political." Mr Blankfein said the SEC action "hurts America", this person said.

Mr Blankfein did not initiate talk about the politics or timing of the SEC complaint which was announced on Friday, said a person familiar with the matter.

Mr Blankfein's charm offensive with clients came as it emerged Fabrice Tourre, the Goldman employee also named in the SEC case, would appear with him next week before a US Senate panel investigating Wall Street's role in the financial crisis. Mr Blankfein said Mr Tourre told a staffer of ACA, the manager of the security, that Paulson & Co intended to bet against the transaction, say people who received the call.

This view goes against SEC charges that Goldman failed to disclose Paulson & Co was taking the opposite side of the deal.

John Gapper, Page 13 US versus Goldman, Page 22