Pitt Thinks SEC is Betting the House With Goldman

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Former SEC chairman Harvey Pitt, who now runs a consulting business, thinks the SEC is “betting the house” by going after Goldman Sachs.

In a column for The Daily Beast, Pitt says the SEC erred in not notifying Goldman or having settlement discussions with them before making the suit public. He also points tout that a split vote by SEC commissioners on whether to pursue the Goldman charges doesn’t help the agency’s credibility in the matter.

It’s pretty clear that, if Pitt had been in charge, he would hesitate to bring the Goldman charges. It should be noted that Pitt's firm, Kalorama Partners, once advised John Paulson on regulatory matters regarding mortgage securities. In an editor's note on the site, Pitt said, "I had no involvement in these transactions nor with the SEC's decision whether, and whom, to sue. My article doesn't mention Paulson or discuss its role, other than to paraphrase the SEC's allegation.”

From The Daily Beast

The problem with litigation is losing. But even if the SEC prevails, its reward may prove ephemeral. After all, there aren’t any widows or orphans in the immediate vicinity of the central transaction, and even victory could be tarnished by questions about its potential motivations regarding the manner and timing of the SEC’s decision to sue. Is that worth the potential risk? The question answers itself.

If the SEC prevails, it might reassert its position as a player in the current financial regulatory scene. But the lawsuit carries big stakes if the SEC loses—among other things, this case will influence the reputations of both Chairman Mary Schapiro, and Enforcement Division chief, Rob Khuzami.

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After ratting on his pals for insider trading, former Goldman analyst David Pajcin decided to hightail it out of town. (Most likely to his native Croatia, although we doubt he’s holed up with his underwear seamstress aunt.) But if authorities can find him, and you know the crack investigators at the SEC will, Pajcin will owe the government $28 million, according to a judgement handed down by U.S. District Judge Kimba Wood late yesterday.