SEC vs. Goldman Sachs: Would epic courtroom battle devastate both?

April 21, 2010 | By Jim Kim

The LA Times suggests that a courtroom showdown pitting the SEC (SEC news) against Goldman Sachs (NYSE: GS) would be "epic." I couldn't agree more. But I also think both side have more to lose than gain, which is why I continue to predict a settlement.

From the SEC perspective, proving an actual crime is starting to look more daunting, unless agency lawyers have some aces up their sleeve, stuff we haven't seen yet. A loss would be a terrible blow to an agency already reeling from the Bernard Madoff (Bernard Madoff news), Allen Stanford (Allen Stanford news) and other scandals. In some ways, the press about the SEC has been even worse than the press about Goldman Sachs. If the agency proceeds and doesn't slam dunk the ball, the agency's PR crisis will only deepen. A win would do wonders, but is this the case to risk it on?

From Goldman Sachs' perspective, the firm may well prevail and win a not guilty verdict at trial. But in the process their business practices and ethics will be dissected and likely found wanting. That's already happening. The firm may not have committed a crime but their conduct hardly impresses. Goldman Sachs runs the risk of being judged unethical and sleazy if not actually guilty. The distraction would also be massive. When cooler heads prevail, will both sides see this?

For more:
- here's the LATimes article