Goldman Sachs 2013 Annual Report Download - page 212

Notes to Consolidated Financial Statements
plaintiffs’ class allegations on the ground that plaintiffs
lacked standing to pursue certain equitable remedies and
denying Group Inc.’s and GS&Co.’s motion to strike
plaintiffs’ class allegations in their entirety as premature.
On March 21, 2013, the U.S. Court of Appeals for the
Second Circuit held that arbitration should be compelled
with one of the named plaintiffs, who as a managing
director was a party to an arbitration agreement with
the firm.
Investment Management Services. Group Inc. and
certain of its affiliates are parties to various civil litigation
and arbitration proceedings and other disputes with clients
relating to losses allegedly sustained as a result of the firm’s
investment management services. These claims generally
seek, among other things, restitution or other compensatory
damages and, in some cases, punitive damages.
Goldman Sachs Asset Management International (GSAMI)
is the defendant in an action filed on July 9, 2012 with the
High Court of Justice in London by certain entities
representing Vervoer, a Dutch pension fund, alleging that
GSAMI was negligent in performing its duties as investment
manager in connection with the allocation of the plaintiffs’
funds among asset managers in accordance with asset
allocations provided by plaintiffs and that GSAMI
breached its contractual and common law duties to the
plaintiffs. Specifically, plaintiffs allege that GSAMI caused
their assets to be invested in unsuitable products for an
extended period, thereby causing losses, and caused them to
be under-exposed for a period of time to certain other
investments that performed well, thereby resulting in
foregone potential gains. The plaintiffs are seeking
monetary damages up to €209 million.
Financial Advisory Services. Group Inc. and certain of its
affiliates are from time to time parties to various civil
litigation and arbitration proceedings and other disputes
with clients and third parties relating to the firm’s financial
advisory activities. These claims generally seek, among other
things, compensatory damages and, in some cases, punitive
damages, and in certain cases allege that the firm did not
appropriately disclose or deal with conflicts of interest.
Credit Derivatives Antitrust Matters. The European
Commission announced in April 2011 that it was initiating
proceedings to investigate further numerous financial
services companies, including Group Inc., in connection
with the supply of data related to credit default swaps and
in connection with profit sharing and fee arrangements for
clearing of credit default swaps, including potential anti-
competitive practices. On July 1, 2013, the European
Commission issued to those financial services companies a
Statement of Objections alleging that they colluded to limit
competition in the trading of exchange-traded unfunded
credit derivatives and exchange trading of credit default
swaps more generally, and setting out its process for
determining fines and other remedies. Group Inc.’s current
understanding is that the proceedings related to profit
sharing and fee arrangements for clearing of credit default
swaps have been suspended indefinitely. The firm has
received civil investigative demands from the U.S.
Department of Justice (DOJ) for information on similar
matters. Goldman Sachs is cooperating with the
investigations and reviews.
GS&Co. and Group Inc. are among the numerous
defendants in putative antitrust class actions relating to
credit derivatives, filed beginning in May 2013 and
consolidated in the U.S. District Court for the Southern
District of New York. The complaints generally allege that
defendants violated federal antitrust laws by conspiring to
forestall the development of alternatives to over-the-
counter trading of credit derivatives and maintain inflated
bid-ask spreads for credit derivatives trading. The
complaints seek declaratory and injunctive relief as well as
treble damages in an unspecified amount. On
January 31, 2014, the plaintiffs filed a consolidated
amended complaint.
Libya-Related Litigation. GSI is the defendant in an
action filed on January 21, 2014 with the High Court of
Justice in London by the Libyan Investment Authority,
relating to nine derivative transactions between the plaintiff
and GSI and seeking, among other things, rescission of the
transactions and unspecified equitable compensation and
damages exceeding $1 billion.
European Commission Price-Fixing Matter. On
July 5, 2011, the European Commission issued a Statement
of Objections to Group Inc. raising allegations of an
industry-wide conspiracy to fix prices for power cables,
including by an Italian cable company in which certain
Goldman Sachs-affiliated investment funds held ownership
interests from 2005 to 2009. The Statement of Objections
proposes to hold Group Inc. jointly and severally liable for
some or all of any fine levied against the cable company
under the concept of parental liability under EU
competition law.
Municipal Securities Matters. GS&Co. (along with, in
some cases, other financial services firms) is named as
respondent in a number of FINRA arbitrations filed by
municipalities, municipal-owned entities, state-owned
agencies or instrumentalities and non-profit entities, based
on GS&Co.’s role as underwriter of the claimants’
issuances of an aggregate of over $2.4 billion of auction rate
securities from 2003 through 2007 and as a broker-dealer
with respect to auctions for these securities. The claimants
generally allege that GS&Co. failed to disclose that it had a
practice of placing cover bids in auctions, and failed to
inform the claimant of the deterioration of the auction rate
210 Goldman Sachs 2013 Annual Report