Goldman instructs Steptoe in relation to sub-prime woes

Goldman Sachs chief executive Lloyd Blankfein has instructed Steptoe & Johnson’s white-collar defence team as pressure mounts over allegations that the bank misled clients before the financial crisis hit.

Lloyd Blankfein
Lloyd Blankfein

The claims relate to the way the investment bank sold sub-prime mortgage securities in the run-up to the credit crunch.

There are also allegations that it misled Congress in the aftermath by denying to the Senate permanent subcommittee that it has deliberately benefited from the property slump by betting that mortgage values would drop and continuing to sell mortgages to other banks. Goldman insists it gave truthful evidence.

The subcommittee referred evidence relating to the bank’s conduct to the US justice department in the spring.

Blankfein has instructed Washington partner Reid Weingarten, who has previously acted for Enron accounting officer Richard Causey.

In a statement, Goldman said: “As is common in such situations, Mr Blankfein and other individuals who were expected to be interviewed in connection with the justice department’s inquiry into certain matters raised in the PSI report, hired counsel at the outset.”

The statement implied that Blankfein had hired Steptoe & Johnson months ago when federal prosecutors kicked off their review.