Blindsided

Goldman Shocked by SEC Suit

Goldman Sachs apparently isn't too big to wail: The Wall Street behemoth admits that it was taken by surprise with Friday's SEC-launched civil fraud suit, despite being warned of possible legal action in July 2009. And as far back as August 2008, Goldman officials knew that controversial mortgage securities they created were being examined; they were warned thereafter. In September, the firm responded to the SEC's probe in great detail but had not heard back, until last week, when the suit was made public. Many Goldman employees claim they first learned of the suit through the media. The SEC typically gives firms advance notification of pending suits as a courtesy, but it acted especially aggressively in this case, the Wall Street Journal reports—perhaps trying to send a message to other banks.