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Exclusive:
Abacus Might Have Had Other Benefits for Goldman
Reuters - April 23, 2010
by Matthew Goldstein
Goldman Sachs Group may have used a subprime
mortgage-linked security that is the
focus of a U.S. civil fraud lawsuit against
the bank to unload other complex bonds
it created, according to a deal document
obtained by Reuters.
The 196-page prospectus for Abacus reveals
that the initial collateral for the deal's
so-called funded notes was supposed to
include a big chunk of another security
underwritten that same year by Goldman
Sachs called Greywolf CLO 1.
Goldman arranged
and marketed the Greywolf CLO for Greywolf
Capital Management, a Purchase, New York, investment management
firm founded by a group of former Goldman distressed bond traders.
Derivatives
consultant Janet Tavakoli said the use of Abacus funds to buy
Greywolf assets may have posed a conflict of interest
for Goldman. The Greywolf link could prove problematic if institutional
buyers were not told Goldman underwrote the Greywolf deal, or
did not know that Goldman had relevant information about the
quality of the Greywolf portfolio, she said.
"
Goldman's
paw prints were all over this," said Tavakoli. "There
is a conflict of interest between investors and underwriters
who are putting their own deals into CDOs."
The Abacus prospectus
said a copy of the Greywolf CLO prospectus was also provided to
prospective investors. But the Greywolf
offering document was not attached to the Abacus prospectus obtained
by Reuters.
END OF EXCERPT
Janet
Tavakoli is the president of Tavakoli
Structured Finance, a Chicago-based firm
that provides consulting to financial institutions
and institutional investors. Ms. Tavakoli
has more than 20 years
of experience in senior investment banking
positions, trading, structuring and marketing
structured financial products. She
is a former adjunct professor of derivatives
at the University of Chicago's Graduate
School of Business. She is the author of: Credit
Derivatives & Synthetic
Structures (John
Wiley & Sons,
1998, 2001), Structured
Finance & Collateralized
Debt Obligations (John
Wiley & Sons, 2008).
Janet
Tavakoli's book on the global financial meltdown is Dear
Mr. Buffett: What An Investor
Learns 1,269 Miles From
Wall Street (Wiley 2009)
Clients
of Tavakoli Structured Finance
have the benefit of proprietary consultation, which is
not available in any other paid or public forum. Clients
also commission proprietary research and analysis.
TSF
makes some information available to the general public. Please
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