Prosecutors are investigating Goldman Sachs Group on allegations that the investment bank defrauded local insurers Heungkuk Life Insurance and Heungkuk Fire & Marine Insurance.
The Seoul Central District Prosecutor’s Office said Wednesday it was taking on complaints by the two insurers that the U.S. investment bank sold a high risk, high yielding investment product known as collateralized debt obligations without informing them of risks involved.
The two invested a total of 43.9 billion ($41.1 million) in CDOs sold by the local unit of Goldman Sachs in 2007 and subsequently lost the entire investment.
“Goldman Sachs knew the investment product was junk but sold them to us without informing of the downside risks,” Kim Cheol-kyun, a spokesperson at Heungkuk Life, said.
The insurers on June 28 filed complaints against nine employees at the investment bank.
But Goldman spokesman Christopher Jun said: “The prosecutors’ office has not contacted us on this matter.” Prosecutors declined to elaborate on the case.
The sale of CDOs at Goldman Sachs has faced civil fraud charges in the U.S. where it lost a court bid. On June 13, a U.S. district judge ruled that Fabrice Tourre, a Goldman Sachs executive accused of a similar charge, will have to defend himself against a lawsuit raised by the U.S. Securities and Exchanges Commission.
By Cynthia J. Kim (email@example.com)