The Department of Justice is reportedly considering whether to bring criminal charges against investment bank Goldman Sachs, based on the Securities and Exchange Commission complaint. Speculation is swirling that Wall Street haters could finally get their wish and see some bankers behind bars. Here are the answers to some key question about a potential criminal investigation:
Could a Criminal Case Succeed?
The fraud statute that the SEC is using for its civil suit could also be used to prosecute Goldman criminally. So in theory, it is possible that criminal charges could stick -- if the SEC's civil case succeeds. Yet, the standard for a criminal case is much higher. The DOJ must present very compelling evidence that a jury would be able to understand well enough to find that, beyond doubt, Goldman and/or some of its bankers are guilty of fraud. Given that there are many people questioning whether even the civil case can succeed under a weaker standard of guilt, it's relatively doubtful that the criminal charges would stick. Yet, the public doesn't have all of the information, so it's too soon to know the fate of a criminal case for sure.
Who Could Be Prosecuted?
The civil case was brought against the firm and a single named banker -- Fabrice Tourre. Who might the DOJ choose to prosecute? According to Chicago Law School Professor and securities law expert M. Todd Henderson, the sky is the limit. If the DOJ feels particularly ambitious, they could try to allege a conspiracy and prosecute the heads of the mortgage unit, he says. But he also finds it unfathomable that the DOJ could show that such a conspiracy existed. He further thinks it's extremely unlikely that the government could indict the firm itself, as this would essentially condemn Goldman as a criminal organization. As a result, it's more likely prosecutors focus on a few bankers, like Tourre, if they have enough evidence to bring a case.