Goldman Sachs is taking its fight against a government civil fraud case to Capitol Hill.
Goldman CEO Lloyd Blankfein will testify before a Senate panel Tuesday in what are expected to be his first public comments on the Securities and Exchange Commission's lawsuit charging that the bank defrauded two investors, according to a person familiar with the plans. He spoke on condition of anonymity because the appearance hasn't been publicly announced.
A 31-year-old Goldman employee at the center of the lawsuit, Fabrice Tourre, is also expected to be questioned at the hearing, according to media reports. Goldman Sachs Group Inc. spokesman Samuel Robinson declined to comment on the reports.
Blankfein will answer questions before the Senate's Permanent Subcommittee on Investigation, which is investigating the role of major banks in the subprime mortgage crisis, according to the person. Blankfein agreed to appear before the panel before the SEC sued the bank but is expected to take questions on the case. The panel declined to comment.
The big bank isn't the only one on the defensive. The billionaire hedge fund manager whose bearish bets were brought to light by the SEC case reached out to his investors a second day Wednesday to assure them the fund did nothing wrong.
John Paulson addressed investors in his Paulson & Co. hedge fund during a conference call that was described as upbeat by a person familiar with the discussion. He requested anonymity because the conversation was confidential.
Meanwhile, there were signs that the SEC may have a tough time proving its case. The SEC alleges the bank misled two investors who bought complex mortgage-related products that were crafted in part by Paulson. The hedge fund manager was betting the mortgages would fail. The agency says Goldman didn't disclose Paulson's intentions to the investors, IKB Deutsche Industriebank AG and ACA Management LLC.
But media reports Wednesday said that a former member of Paulson's firm told the SEC during its probe that he informed ACA Management that the hedge fund was planning to bet against the securities. A spokeswoman for the former employee, Paolo Pellegrini, declined to comment on the reports.
If true, Pellegrini's testimony would conflict with the heart of the SEC's charge that ACA was unaware of Paulson's negative bets.
SEC spokesman John Nester declined to comment on Pellegrini's reported testimony, saying only that: "Our case is built on a thorough evidentiary record that includes testimony, documents, handwritten notes and e-mails that will be presented in court at the appropriate time."
AP Real Estate Writer Alan Zibel contributed to this report from Washington.
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