NEW YORK – A federal judge Tuesday approved the deal calling for Goldman Sachs & Co. to pay $550 million to settle civil fraud charges that the Wall Street giant misled buyers of mortgage-related investments.

The agreement approved by U.S. District Judge Barbara Jones in Manhattan contained the largest penalty against a Wall Street firm in the history of the Securities and Exchange Commission.

Announced last week, it calls for Goldman to pay a $535 million fine and $15 million in restitution of fees it collected. It also requires $300 million to be paid to the government and $250 million to be set aside for two European banks that lost money on their investments.

Karen Patton Seymour, a lawyer for Goldman Sachs, declined to comment on the approval.

In the judge’s order, Jones wrote that she was not ordering Goldman Sachs to pay a civil penalty beyond the $535 million, but was continuing to preside over the case to ensure the terms of the agreement were carried out.

She noted that Goldman Sachs, which did not admit liability, nevertheless agreed to cooperate fully with the government by producing documents and other materials and by making its employees available for interviews.

Advertisement

Final approval of the settlement came on the same day that Goldman Sachs announced an 83 percent drop in second-quarter net income.

Goldman Sachs Group Inc. blamed its earnings fall on a rough spring for the financial markets, and it included in the quarter the $550 million charge for the settlement with the SEC.

The SEC filed a civil case against Goldman in April as it flexed its muscles against Wall Street following a series of embarrassments.

The SEC had accused Goldman of selling mortgage securities without telling buyers that they had been created with input from a client that was betting on them to fail. The securities cost investors close to $1 billion while helping the Goldman client capitalize on the housing collapse, the SEC charged.

In its settlement, Goldman acknowledged that its marketing materials for the deal at the center of the SEC charges omitted important information for buyers.

 


Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.