Goldman Sachs 2015 Annual Report Download - page 213

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On January 14, 2016, the firm announced an agreement in
principle, subject to definitive documentation, to resolve
the ongoing investigation of the Residential Mortgage-
Backed Securities Working Group of the U.S. Financial
Fraud Enforcement Task Force. The agreement in principle
will resolve actual and potential civil claims by the U.S.
Department of Justice, the New York and Illinois Attorneys
General, the National Credit Union Administration (as
conservator for several failed credit unions) and the Federal
Home Loan Banks of Chicago and Seattle, relating to the
firm’s securitization, underwriting and sale of residential
mortgage-backed securities from 2005 to 2007. Under the
terms of the agreement in principle, the firm will pay a
$2.39 billion civil monetary penalty, make $875 million in
cash payments and provide $1.80 billion in consumer relief.
The consumer relief will be in the form of principal
forgiveness for underwater homeowners and distressed
borrowers; financing for construction, rehabilitation and
preservation of affordable housing; and support for debt
restructuring, foreclosure prevention and housing quality
improvement programs, as well as land banks. The firm has
established a reserve for its estimated obligations under the
agreement in principle. See also “Regulatory Investigations
and Reviews and Related Litigation” below. The firm has
also received, and continues to receive, requests for
information and/or subpoenas from, and is engaged in
discussions with, federal, state and local regulators and law
enforcement authorities as part of inquiries or
investigations relating to the mortgage-related
securitization process, subprime mortgages, CDOs,
synthetic mortgage-related products, sales communications
and particular transactions involving these products, and
servicing and foreclosure activities, which may subject the
firm to actions, including litigation, penalties and fines.
The firm may be the subject of additional putative
shareholder derivative actions, purported class actions,
rescission and “put-back” claims and other litigation,
additional investor and shareholder demands, and
additional regulatory and other investigations and actions
with respect to mortgage-related offerings, loan sales,
CDOs, and servicing and foreclosure activities. See Note 18
for information regarding mortgage-related contingencies
not described in this Note 27.
GT Advanced Technologies Securities Litigation.
GS&Co. is among the underwriters named as defendants in
several putative securities class actions filed in
October 2014 in the U.S. District Court for the District of
New Hampshire. In addition to the underwriters, the
defendants include certain directors and officers of GT
Advanced Technologies Inc. (GT Advanced Technologies).
As to the underwriters, the complaints generally allege
misstatements and omissions in connection with the
December 2013 offerings by GT Advanced Technologies of
approximately $86 million of common stock and
$214 million principal amount of convertible senior notes,
assert claims under the federal securities laws, and seek
compensatory damages in an unspecified amount and
rescission. On July 20, 2015, the plaintiffs filed a
consolidated amended complaint. On October 7, 2015, the
defendants moved to dismiss. GS&Co. underwrote
3,479,769 shares of common stock and $75 million
principal amount of notes for an aggregate offering price of
approximately $105 million. On October 6, 2014, GT
Advanced Technologies filed for Chapter 11 bankruptcy.
FireEye Securities Litigation. GS&Co. is among the
underwriters named as defendants in several putative
securities class actions, filed beginning in June 2014 in the
California Superior Court, County of Santa Clara. In
addition to the underwriters, the defendants include
FireEye, Inc. (FireEye) and certain of its directors and
officers. The complaints generally allege misstatements and
omissions in connection with the offering materials for the
March 2014 offering of approximately $1.15 billion of
FireEye common stock, assert claims under the federal
securities laws, and seek compensatory damages in an
unspecified amount and rescission. On August 11, 2015,
the court overruled the defendants’ demurrers, which
sought to have the consolidated amended complaint
dismissed. On November 16, 2015, plaintiffs moved for
class certification. On January 6, 2016, FireEye and its
director and officer defendants filed a motion for judgment
on the pleadings for lack of subject matter jurisdiction.
GS&Co. underwrote 2,100,000 shares for a total offering
price of approximately $172 million.
Goldman Sachs 2015 Form 10-K 201