GOLDMAN
SACHS COULD BE SUED
FOR HELPING HIDE DEBTS WHEN IT JOINED EURO
GOLDMAN
SACHS faces the prospect of potential legal action from GREECE over the complex
financial deals in 2001 that many blame for its subsequent debt crisis.
A leading adviser to debt-riven
countries has offered to help ATHENS recover some of the vast profits made by
the investment bank.
The Independent has learnt that a former GOLDMAN
banker, who has advised indebted governments on recovering losses made from complex
transactions with banks, has written to the GREEK government to advise that it
has a chance of clawing back some of the hundreds of millions of dollars it
paid GOLDMAN to secure its position in the single currency.
The development came as GREECE edged towards a last-minute deal
with its creditors which will keep it from crashing out of the single currency.
The deal is based on fresh economic reform proposals submitted
by ATHENS which bear a striking
similarity to the creditors’ offer rejected by
the GREEK people in the referendum– sparking claims that Prime Minister ALEXIS
TSIPRAS has effectively executed a huge U-turn in order to avoid a catastrophic
“GREXIT”.
GREECE managed to keep within the strict MAASTRICHT rules for EUROZONE
membership largely because of complex financial deals created by the investment
bank which critics say disguised the extent of the country’s outstanding debts.
GOLDMAN
SACHS THE BIG WINNER
GOLDMAN SACHS is said to have made as much as $500m from the
transactions known as “swaps”. It denies that figure but declines to say what
the correct one is.
The banker who stitched it together, Oxford-educated ANTIGONE
LOUDIADIS, was reportedly paid up to $12m in the year of the deal. Now JABER
GEORGE JABBOUR, who formerly designed swaps at GOLDMAN, has told the GREEK
government in a formal letter that it could “right historical wrongs as part of
[its] plan to reduce GREECE’S debt”.
Mr JABBOUR successfully assisted PORTUGAL in renegotiating
complex trades naively done with LONDON banks during the financial crisis. His
work helped trigger a parliamentary inquiry and cost many senior officials and
politicians their jobs. It also triggered major compensation payments by banks
to the PORTUGUESE taxpayer.
ILLICIT
BANKING
Mr JABBOUR, who now runs ETHOS CAPITAL ADVISORS, has also helped
expose other cases including allegations against GOLDMAN SACHS and SOCIÉTÉ
GÉNÉRALE over their dealings with LIBYA relating to financial transactions that
left the country’s taxpayers billions of dollars out of pocket. Both banks deny
wrongdoing.
Based on publicly available information, he believes the size of
the profit GOLDMAN made on the transactions was unreasonable. Scrutiny and
analysis of the documents and email exchanges could give GREECE grounds to seek
compensation and assess if the deals were executed for the sole purpose of
concealing the country’s debts.
Background Information:
THE GREEK ISSUE: IN REALITY
IT WAS A BAIL OUT OF SOME OF THE RICHEST PEOPLE IN EUROPEAN SOCIETY ON THE COST
ON SOME OF THE POOREST
GRIECHENLAND: GEHEIMER DEAL MIT GOLDMAN SACHS LÖSTE EURO-KRISE AUS
GERMANY DEMAND SELL-OFF OF
GREECE’S STATE OIL COMPANIES!!!
LENDERS TOOK
GREECE’S EURO MEMBERSHIP AS A STAMP OF CREDITWORTHINESS
GREECE’S membership of the euro gave it access to billions of
easy credit which it was then incapable of paying back, leading to its current
crisis. Lenders took its euro membership as a stamp of creditworthiness, but
the true state of its economy was far less healthy.
Under Ms LOUDIADIS’S guidance, GOLDMAN swapped debt issued by GREECE
in dollars and yen for euros which were priced at a historical exchange rate
that made the debt look smaller than it actually was. The swaps reportedly made
about 2 per cent of GREECE’S debt disappear from its national accounts.
The size and
structure of the deal enabled the bank to charge a far bigger fee than is usual
in swap transactions, and GOLDMAN persuaded GREECE not to test the transaction
with competitors to ensure it was getting good value for money.
GREECE DID
NOT REPORT THE GOLDMAN SACHS TRANSACTIONS IN 2008
Such deals were not uncommon among smaller countries attempting
to enter the EUROZONE club, but they were stopped by the EU economic statistics
agency Eurostat in 2008. Eurostat has said GREECE did not report the GOLDMAN
SACHS transactions in 2008, when it and other countries were told to restate
their accounts.
Two of the men in charge of the debt management agency of GREECE
at the time have argued the department did not understand what it was buying
and lacked the expertise to judge the risks or costs.
One, CHRISTOFOROS SARDELIS, told BLOOMBERG news agency that Ms LOUDIADIS
offered one swap which had what is known as a “teaser rate”, or three-year
grace period. But the GREEK official realized three months after signing the
deal that it was far more complicated than he first thought – a situation
exacerbated by the 9/11 attacks’ downward impact on global interest rates.
While GOLDMAN reworked the deal, GREECE continued to lose heavily.
SAUL HAYDON ROWE, a partner at TURING EXPERTS, a team of former
bankers who advise in court cases involving bank derivatives, said: “GREECE
would have to unpick the trades completely and look into what advice was given,
and how much GOLDMAN might have expected to make over the course of the
transaction.
“For a legal
action to go ahead, GREECE would have to show that GOLDMAN SACHS said something
it knew was untrue or which it did not care was true or not.”
GOLDMAN said its transactions were in accordance with Eurostat
rules. It said they reduced GREECE’S foreign denominated debts by €2.37bn, or
1.6 per cent in terms of debt-to-GDP ratio, adding that they had “minimal
effect on the country’s overall fiscal situation.”
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DATELINE GREECE:
GOLDMAN, JUST PAY UP
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Below article was posted on this blog October 2011!
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As GREECE teeters on the
edge of sovereign default of around $300 billion and sends shudders of
premonition throughout the global economy, the fingerprints of GOLDMAN
SACHS are once again to be found, as in so many crises beforehand. SREERAM
CHAULIA argues that GOLDMAN should accept moral responsibility and contribute
funds to bailing out GREECE.
BANKING INSTITUTIONS ARE MORE DANGEROUS THAN STANDING ARMIES
As more skeletons fall out of the
closet, it is coming to light that GREECE'S profligacy was abetted and managed
for several years by the top Wall Street financial firms via complex
instruments.
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FOR CONSULTANCY,
WHICH HELPED GREECE JOIN THE EURO BY HOOK OR BY CROOK, GOLDMAN RECEIVED FEES OF
$300 MILLION
In 2001, before spendthrift GREECE
could enter the EUROZONE by satisfying the deficit limit rules of the currency
union, GOLDMAN SACHS entered the picture with a tricky currency trade deal that
would hide billions of dollars of additional public borrowing and not make it
look like debt. For this piece of consultancy, which helped GREECE join the
euro by hook or by crook, GOLDMAN received fees of $300 million.
In 2005, GOLDMAN sold to the National
Bank of GREECE an “interest rate swap,” one of the notorious derivatives that
have come under scrutiny since the WALL STREET implosion of 2008. GREEK critics
of such dubious debt-hiding transactions had warned their government of the
mounting long-term liabilities to the likes of GOLDMAN, but to no avail.
GREEK ASSETS SELL OFF
–HEAVILY PROMOTED BY GERMAN MINISTER OF FINANCE - WOLFGANG SCHÄUBLE AND GOLDMAN
SACHS
According to news reports, GREECE
mortgaged revenue-generating assets like the national lottery, airports and
highways as part of the agreements with GOLDMAN in what amounted to "a
garage sale on a national scale."
GOLDMAN SACHS is reported to have
attempted a redux of 2001 when its president, GARY COHN, landed in ATHENS in
November 2009 with a similar debt deferral proposal that would continue to fool
investors and the EU. This time around, GREECE did not oblige.
SIMILAR BORROWING
BINGES OCCURRED WITH PIGS, COURTESY OF FINANCIAL DODGING EXPERTISE OF GOLDMAN,
JP MORGAN AND ENTIRE CADRE OF HEDGE FUNDS
But the damage had already been done
over a decade of spiraling foreign debt that was repackaged and postponed with WALL
STREET'S wizardry. We now know that similar borrowing binges were occurring in
the rest of the PIGS (PORTUGAL, ITALY, GREECE and SPAIN) economies courtesy of
the financial dodging expertise of GOLDMAN, JPMORGAN and the entire cadre of Hedge
Funds.
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Economies of developing countries,
especially in AFRICA and LATIN AMERICA, have endured decades of bitter
experiences of falling into debt traps that sap productive resources, benefit
speculative financiers and weaken state capacities to govern.
In their cases, the BRETTON WOODS institutions
acted as economic restructuring consultants and funding taps that only opened
if the recipients met crushing conditionalities.
“ECONOMIC HIT MAN”
LURE POOR COUNTRIES INTO ACCEPTING MASSIVE “DEVELOPING LOANS” FROM THE WORLD
BANK AND USAID
JOHN PERKINS'S book, "Confessions
of an Economic Hit Man," reveals how highly paid professionals with
knowledge of macroeconomics and world affairs were deployed to convince
political and financial leaders of poor countries to accept massive
"development loans" from the WORLD BANK and USAID. Once ensnared, the
supplicants would be subjected to pressure on different issues from WASHINGTON.
In the PIGS economies, it was not so
much strategically motivated hit men working for the U.S. government but rather
some freewheeling U.S. financial corporations that could make a killing out of
clients who were addicted to reckless state spending.
In late February 2010, as the EU began
investigating the WALL STREET shenanigans in ATHENS, GOLDMAN defended its GREEK
misadventures by arguing, predictably enough, that they were legal actions
consistent with the regulations of their time.
Of course, much of the fault lay with
the GREEK politicians who were seduced by the WALL STREET financial advisers
who, for their part, were simply pursuing the bread-and-butter business of
circulating wealth for profit.
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DID U.S. INVESTMENT
BANKS DELIBERATELY DUG THE GRAVES OF PIGS TO WEAKEN THE EURO?
Had ATHENS been more disciplined in
organizing its finances, there would not have been a window of opportunity for GOLDMAN
and company to exploit its vulnerability.
But southern EUROPE'S debt-proneness
has systemic consequences from which WALL STREET cannot easily extricate
itself. While there is no evidence to suggest that U.S. investment banks
deliberately dug the graves of PIGS to weaken the EURO, the disastrous social
costs of their financial chicanery call for reparations.
It may not be unfair if the EU demands
that GOLDMAN, which now leads the earnings chart on WALL STREET, accept moral
responsibility and contribute to bailing out GREECE.
Who knows — now that even the U.S.
Federal Reserve is making noises about investigating GOLDMAN’S practices, the
firm may be in a hurry to pay up.
Written by SREERAM CHAULIA
Editor's Note: This
feature is adapted from a longer version published in The Financial Express on
February 25, 2010
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