WASHINGTON–More than a decade after the financial crisis of 2008-09, the Supreme Court yesterday heard arguments in a case that doesn’t directly involve credit unions but will be of interest, nonetheless.
The case, Goldman Sachs Group v. Arkansas Teacher Retirement System, involves one of the Wall Street firms that sold complex debt investments in the lead-up to the financial crisis, many of which plunged in value with the housing crisis. The scenario presented during court arguments is similar to that involving investments made by corporate credit unions, five of which were eventually placed into conservatorship at a huge financial loss (portions of which have since been offset by recoveries).
In this case, the Supreme Court heard arguments from Goldman Sachs and from pension funds over a claim that the Wall Street giant misled investors about its work in selling those investments.
In its latest brief, the New York Times noted Goldman makes an “interesting argument: Investors shouldn’t rely on statements such as ‘honesty is at the heart of our business’ or ‘our clients’ interests always come first’ that appear in S.E.C. filings and annual reports.”
The Times pointed out the case is a test of shareholders’ ability to sue over claims of investment fraud.
Court Will Be ‘Troubled’ by Claim
“The pension funds have sought to sue as a class over Goldman’s statements, saying that they believed the claims of honesty,” the Times’ analysis stated. “Goldman has argued in its latest brief that the investors are resorting to ‘guerrilla warfare’ and aren’t providing ‘serious legal arguments.’ The bank says that an investor victory would lead to a barrage of future lawsuits over ‘general and aspirational statements’ of the kind made by ‘virtually every public company in America.’”
In his analysis, Robert Jackson Jr., who served as an SEC commissioner from 2018 to 2020 and is now an N.Y.U. law professor, told the Times, “I expect the court to be troubled by the claim that companies cannot be held accountable for saying that clients come first and then acting otherwise.”
As CUToday.info Reported, NCUA continues to wind down the estates of the failed corporates.