Goldman Sachs threw down the gauntlet after the Securities and Exchange Commission accused it of fraud, saying it will vigorously defend itself against all charges.
But many experts say the firm would do better to settle.
Goldman’s motion to get the suit thrown out for lacking legal merit will almost surely fail. And after that, the risks grow larger for Goldman and its negotiating position turns weaker.
“There’s a very low probability that Goldman could get the case dismissed,” University of North Carolina law professor Thomas Hazen told Bloomberg.
“Every pretrial motion the SEC wins, Goldman gets one step closer to losing.”
Assuming the court doesn’t dismiss the case, it should go to discovery.
The SEC could then ask Goldman for more information, and that process could inspire private lawsuits, more government charges and negative media attention, legal experts tell Bloomberg.
“The evidence and rumors would be difficult to contain,” said University of Notre Dame law professor Lisa Casey. “The market could react any time more information leaks out to the press.”
To be sure, it wouldn’t look that great if Goldman settles either. “For Goldman not to stand behind its deals would be problematic,” Tulane University law professor Onnig Dombalagian told Bloomberg.
While Goldman’s reputation may be permanently tarnished, some experts say it has a good chance of prevailing in court.
“I think they have a pretty strong case, certainly on the merits,” Cornell University law professor Charles Whitehead told Reuters.
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