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    Prosecutors' Letter About Lloyd Blankfein

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    U.s. Government seeks to preclude defendant from cross-examining a Government witness. Government intends to call Lloyd Blankfein to testify on the subject of Raj at Gupta's service on the Goldman Sachs Board of Directors. Government wants to know whether Goldman Sachs bears responsibility for the 2008 financial crisis.

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    Prosecutors' Letter About Lloyd Blankfein

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    U.s. Government seeks to preclude defendant from cross-examining a Government witness. Government intends to call Lloyd Blankfein to testify on the subject of Raj at Gupta's service on the Goldman Sachs Board of Directors. Government wants to know whether Goldman Sachs bears responsibility for the 2008 financial crisis.

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    U.s. Government seeks to preclude defendant from cross-examining a Government witness. Government intends to call Lloyd Blankfein to testify on the subject of Raj at Gupta's service on the Goldman Sachs Board of Directors. Government wants to know whether Goldman Sachs bears responsibility for the 2008 financial crisis.

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    5K views24 pages

    Prosecutors' Letter About Lloyd Blankfein

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    DealBook
    U.s. Government seeks to preclude defendant from cross-examining a Government witness. Government intends to call Lloyd Blankfein to testify on the subject of Raj at Gupta's service on the Goldman Sachs Board of Directors. Government wants to know whether Goldman Sachs bears responsibility for the 2008 financial crisis.

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    U.S. Department of Justice United States Attorney Southern District of New York Dre Silvio}. Molo Building (One Saint indo Placa ‘New York Mew York 10007 March 21, 2011 By Hand Delivery ‘The Honorable Richard J. Holwell United States District Judge Souther District of New York 500 Pearl Street New York, NY 10007 Re: United States v. Raj Rajaratnam, $2.09 Cr. 1184 (RH) Dear Judge Holwell: ‘The Government respectfully submits this letter in order to move to preclude the defendant from cross-examining a Government witness, Lloyd Blankfein, on (i) whether Goldman Sachs bears responsibility for the 2008 financial crisis, and (ji) whether Goldman Sachs is presently the subject of any pending investigations by cither the Department of Justice (“DOJ”) or the U.S. Securities and Exchange Commission (the “SEC”). The Government makes this application pursuant to Federal Rules of Evidence 402 and/or 403, ‘The Government intends to call Lloyd Blankfein, the CEO of Goldman Sachs, to testify on the subjects of Rajat Gupta’s service on the Goldman Sachs Board of Directors, the duties of confidentiality that Gupta owed to Goldman Sachs, and certain confidential information that Gupta obtained through his service on Goldman’s Board in 2008. On March 7, 2010, Raj Rajaratnam served a trial subpoena on Goldman Sachs requesting, among other things, “documents sufficient to show currently active investigations being conducted by” the DOJ, SEC and the U.S. Attomey’s Office for the Southern District of New York that concern Goldman Sachs. A copy of this subpoena is attached hereto as Exhibit A. The Government’s understanding is that Goldman Sachs conferred with Rajaratnam regarding the subpoena and responded by referring Rajaratnam to its Annual Report on Form 10» K for Fiscal Year Ended December 31, 2010, which was filed on February 28, 2011, The relevant portions of this Form 10-K (pages 191-201) are attached hereto as Exhibit B. ‘The Form 10-K contains references to approximately 20 different “legal proceedings,” among them “Financial Crisis-Related Matters,” “Mortgage-Related Matters,” and “Fannie Mae Honorable Richard J. Holwell March 21, 2011 Page 2 Litigation.” Importantly, not one of the 20 different legal proceedings concerns Raj Rajaratnam, the Galleon Group, or Rajat Gupta. Nor does the Form 10-K indicate that any of the various “legal proceedings” bears upon the credibility of Mr. Blankfein, On March 20, 2011, Rajaratnam sent a letter to the Government (attached as Exhibit ) requesting the production of documents sufficient to identify all “open investigations” of Goldman Sachs by the DOJ or SEC. In furtherance of this request, Rajaratnam cites United States v. Chitty, 760 F.2d 425, 428 (2d Cir. 1985), a case in which prosecutors failed to notify the defense that one of the Government's witnesses had been notified that he was the target of an investigation by the United States Attomey’s office. This case is wholly inapposite for the following reason: This Office has not notified Mr. Blankfein or Goldman Sachs that either is a target (or, for that matter, a subject) of any pending criminal investigation. There is simply no risk that Mr. Blankfein might alter his testimony to affect the outcome of an investigation since Goldman Sachs has received no such notification from this Office. Pending Legal Proceedings. Second, this Court should preclude cross-examination of Mr. Blankfein on the various legal proceedings described in the Form 10-K. Those proceedings are of no relevance to this matter, sinee those proceedings do not relate to Rajaratnam, Galleon, Gupta, or Mr, Blankfein’s credibility. The only conceivable relevance would be general impeachment of Mr, Blankfein, Rajaratnam might suggest, for example, that because Goldman Sachs is tied up in many different legal proceedings, the firm — and by extension its CEO, Mr. Blankfein ~ is not to be trusted. But this claim is totally unfounded and ‘would threaten confusion of the issues, since the legal proceedings described in the Form 10-K relate to the conduct of Goldman Sachs, and not Mr. Blankfein personally. Moreover, the Form 10-K states (at pg. 191) that “many of these proceedings are at preliminary stages.” The very fact that the proceedings are ongoing means that Goldman Sachs’s conduct (or potential misconduct) is as yet undetermined, Alternatively, Rajaratnam might attempt to imply that Mr. Blankfein is testifying in this matter in hopes of obtaining a better resolution of some separate, ongoing legal proceeding involving Goldman Sachs, ‘There is absolutely no support for such a claim, itis entirely false, and the limited probative value of any cross-cxamination along these lines would be substantially outweighed by its prejudice. The Government has made no promise, explicit or implicit, direct ot indirect, express or implied, that Mr, Blankfein or Goldman Sachs will receive anything at all in exchange for his testimony, Indeed, Mr, Blankfein has been subpoenaed to testify and is therefore legally required to appear. Mr. Blankfein’s testimony is limited in scope. Were Mr. Blankiein’s testimony regarding the actions of one Board member, Rajat Gupta, to become the vehicle through which he is called upon to answer questions regarding any number of unrelated pending proceedings, there would be a serious danger of prejudice and confusion, Honorable Richard J, Holwell March 21, 2011 Page 3 Goldman Sachs? Role in the 2008 Financial Crisis. Second, this Court should preclude the defendant from suggesting to the jury through questions or otherwise that Goldman Sachs or Mr. Blankfein was responsible for the 2008 financial crisis. Any such attempt to impeach Mr, Blankfein in this manner should be precluded pursuant to Federal Rules of Evidence 402 and 403. Whether Goldman Sachs played any role in that crisis is wholly irrelevant to Mr, Blankfein’s testimony about Mr. Gupte. Moreover, even if such issues were somehow relevant, the probative value of such evidence is substantially outweighed by the danger of unfair prejudice, Many individuals, including, potentially, the jurors, have strong, feelings about that crisis. 1 was for this very reason that defense counsel requested that the Government not put on evidence that Rajaratnam was in any way responsible for the crisis (and the Government agreed that it would not do so), Were defense counsel to suggest through eross- examination or otherwise that Mr. Blankfein or his firm was responsible for the fiscal crisis, there would be a risk of undue, unwarranted juror prejudice against Mr. Blankfein’s testimony. Goldman Sachs is not on trial in this matter. ‘The cross-examination of Mr. Blankfein is simply not the appropriate forum to delye into the highly complex causes of the 2008 financial erisis or the ensuing economic recession. Respectfully submitted, PREET BHARARA United States Attorney for the of New York by: JONATHAN STREE REED BRODSKY Assistant United States Attorneys ANDREW MICHAELSON Special Assistant United States Attorney ER cc (by email): John M. Dowd, Esq. ‘erence J. Lynam, Esq. AQ 89 (Rev. 08/09 Subpoena to Testify at a Hearing Til ina Criminal Case UNITED STATES DISTRICT COURT for the Southern District of New York United States of America ) ve ) RAJ RAJARATNAM ) Case No. $2.09 Cr, 1184 (RH) aa 3 SUBPOENA TO TESTIFY AT A HEARING OR TRIAL IN A CRIMINAL CASE ‘To: The Goldman Sachs Group, Inc. Glo Stove Poikin Sullivan & Cromwell, LLP 125 Broad Siroot New York, New York 10004-2498, YOU ARE COMMANDED to appear in the United States district court at the time, date, and place shown in this criminal case. When you arrive, you must remain at the court until the judge or a court officer allows you to leave. [Place of Appearance: United States District Court Courtroom No! 475, Southor Distrit of New York Dace Tin 500 Pearl Street me: 93/15/2014 9:00 am You must also bring with you the following documents, electronically stored information, or objects blank not applicable) ‘As described in the attached Exhibit A (SEAL) . : a i aise RUBY J. KRAJICK a CLERK'OF COURT Coaiurcnss Ro. Ou, Signo of Clerk cr Deputy Clerk Date: ‘The name, address, e-mail, and telephone number of the attorney representing (name ofpary) __ Ra] Rejaratnam Who requests this subpoena, are: John M, Dowd (idowd@akingump.com) Terence J. Lynam (ynam@akingump.com) Wiliam E. White (wwhite@ekingump.com) ‘Akin Gump Strauss Hauer & Feld LLP 1933 New Hampshire Avenue N.W. Washington, DC 20036 202,887 4386 ‘AO 9 (Rev. 0805 Subpoons to Tostiy ata Hering or ina Criminal Case (Page 2) Case No, $2.09 Cr. 1184 (RJM) PROOF OF SERVICE ‘This subpoena for (name of nividua ad tie, ary) was received by me on (dat) 1 I served the subpoena by delivering a copy to the named person as follows: (on (date) G Tretumed the subpoena unexecuted because: Unless the subpoena was issued on behalf of the United States, or one of its officers or agents, 1 have also tendered to the witness fees for one day’s attendance, and the mileage allowed by law, in the amount of 8 My fees are $ for travel and § for services, foratotalofS 0.00 I declare under penalty of perjury that this information is true. Date: i ‘ s ‘Server's signature Printed name and ile Server's address ‘Additional information regarding attempted service, ete: EXHIBIT A 1. 3. RULES OF CONSTRUCTION Any term that references a corporation, partnership, proprietorship, association, organization, governmental entity, group of Persons, or any other business or legel entity shall be deemed to include reference to its agents, accountants, advisors, employees, attomeys, officers, directors, direct or indirect shareholders, members, representatives, affiliates, subsidiaries, predecessors, successors, assigns, or any other Person acting or purporting to act on its behalf, The terms (a) “and” and “or” shall be construed either disjunctively or conjunctively as to bring within the scope of the discovery request all responses that might otherwise be construed to be outside of its scopes and (b) “each” and “all” shall be construed as all and each, ‘The use of (a) any singular noun shall be construed to include the plural, and vice versa, and (b) a verb in any tense shall be construed as the use of the verb in all other tenses. DEEINITIONS “Communication” means the transmittal of information (in the form of facts, ideas, inquiries or otherwise). "Document" means every writing or record of whatever type and description in the possession, custody or control of the Company or any of its directors, officers, employees, or agents, however made, and inciudes all handwritten, typed, printed, recorded, transcribed, taped, filmed, graphic or sound reproduction material, magnetic cards or cartridges, optical storage devices, and computer records, printouts, runs, cards, tapes, or disks (together with all programming instruetions and other material necessary {for their use), "Document" includes every copy of every document where such copy is not identical to the original because of any addition, deletion, alteration, or notation. "Document" specifically includes, but is not limited to, electronic mail, handwritten notes; statements or chatis of organization; telephone and personnel directories; press releases; announcements; notices; statements of procedure and policy; biographies and personnel files; individual appointment calendars and schedules; card files; diaries; calendar and diary entries; telephone logs; routing slips; records or evidence of incoming and outgoing telephone calls; itineraries; activity reports; travel vouchers and accountin, ‘bank records; accounting and bookkeeping records and materials; financial records and statements; external or internal correspondence; cables; telexes; toletypes; telegrams; telecopies; labeling; photographs; slides; verbal or written communications; word processing system memory in any form; guidelines; standards; memoranda; letters; _messages; reports; plans; forecasts; summaries; briefing materials; studies; notes; ‘working papers; graphs; maps; charts; diagrams; agendas; minutes; transcripts, records, or summaries of any meeting, conversation, conference or communication; and all attachments to any of the items set forth in this paragraph, “Identify” (with respect to persons). When referring to a person, “to identify” means to give, to the extent known, the person's full name, present or last known address, and 1 when referring to a natural person, additionally, the present or last known place of employment. Once a person has been identified in accordance with this subparagraph, only the name of that person need be listed in response to subsequent discovery requesting the identification of that person. 4, “Identify” (with respect to documents), When refetting to documents, “to identify” means to give, to the extent known, the (i) type of document; (ii) general subject matter; (ii) date of the document; and (iv) author(s), addressee(s) and recipient(s). 5, “Parties.” With respect to “parties,” the term “defendant” as well as a party's full or abbreviated name or a pronoun referring to a party mean the party and, where applicable, its officers, directors, employces, partners, corporate parent, subsidiaries or affiliates. This definition is not intended to impose a discovery obligation on any person who is not aa party to the litigation. 6. “Person” is defined as any natural person or any business, legal or governmental entity or association, 7. “Concerning” means relating to, referring to, describing, evidencing or constituting. 8. “You" or “Your” or “Goldman Sachs” shall mean The Goldman Sachs Group, Inc,, their subsidiaries, afliliates, and joint ventures, and any and all of their predecessors, successors, and assigns, and ali such entities” past or prosent officers, employees, directors, partners, members, managers, represntatives, attorneys, or agents, 9. "Galleon" is the Galleon Group of hedge funds, Galleon Management, LP, and any affiliated entity. 10. “Berkshire Hathaway” shall mean Berkshire Hathaway Inc, their subsidiaries, affiliates, and joint ventures, and any and all of their predecessors, successors, and assigns, and all such entities’ past or present officers, employees, directors, partners, members, managers, representatives, attorneys, or agents. 11. "SEC," “DOJ,” and “FBI,” shall mean, respectively, the United States Securities and Exchange Commission, the United States Department of Justice, and the Federal Bureau of Investigation, ineluding but not limited to any of their divisions, subdivisions, officers, directors, representatives, trustees, agents, employees, affiliates, predecessors, or successors, 12. “Security” or “securities” means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit- sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust cortificate, certificate of deposit for a security, any put, call, straddle, option, or any privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any pat, cal, straddle, option, or in general any interest or instrument commonly known as a “security,” or any certificate of interest or par temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe or purchase, any of the foregoing. 13, "Earnings" means earnings, revenues, guidance, margins, sales, orders, or other financial information regularly compiled and reported on a quarterly and/or annual basis 10 shareholders, the SEC, or other regulatory or self-regulatory entity, 14, “NASDAQ,” “NASD,” “NYSE,” and “FINRA” shall mean, respectively, the NASDAQ Stock Market, the National Associate of Securities Dealers, the New York Stock Exchange, and the Financial Industry Regulatory Authority, their subsidiaries, affiliates, and joint ventures, and any and all of their predecessors, successors, and assigns, and all such entities’ past or present officers, employees, directors, partners, members, managers, representatives, or agents. INSTRUCTIONS 1, These requests for production apply to all information in your possession, custody, or control, including information to which you have access or the reasonable ability to obtain. 2, All documents and tangible things are to be produced in their original file folders, file jackets, envelopes, or covers, or an accurate reproduction thereof. 3. Should a claim be made that any requested document or tangible thing is not subject to discovery by reason of privilege or otherwise, you are requested to identify separately each document or thing for which such a privilege is claimed, the particular request to which such a document or thing is responsive, and a statement of the basis on which the document is withheld sufficient to assess the claim of privilege. 4, Asto any document or thing previously destroyed, specify the author thereof, its date, its content, the identity of persons who received copies, and when and under what circumstances the document was destroyed. 5. The Relevant Time Period for these document requests, unless otherwise specified, shall be from April 1, 2008 to December 31, 2008. 6. Bach request seeks production of all documents and things described along with any attachments, drafts, or non-identical copies. 7. Allclectronic documents, including but not limited to emails, shall be produced in native format, 8. Ifany portion of any document is responsive, the entire document shall be produced, If only part of a document is protected by any privilege, the document shall be produced with only the privileged matter redacted, 9. Documents shall be produced in the order in which they are ordinarily kept and shall not be rearranged in any way. DOCUMENT REQUESTS Minutes of meetings of the Goldman Sachs board of directors or of any sub-group thereof that ocourred on July 17, 2008 and/or October 23, 2008. Documents or other materials distributed to Goldman Sachs board members before or during meetings that occurred on Tuly 17, 2008 and/or October 23, 2008, Interview memoranda or notes of interviews of Rajat K. Gupta, Lloyd C. Blankfein, Gary D. Cohn, and David A. Viniar related to any investigation by Goldman Sachs concerning the disclosure of non-public information to Raj Rajaratnam. Documents sufficient to show currently active investigations being conducted by the United States Securities and Exchange Commission that concern Goldman Sachs. Documents sufficient to show currently active investigations being conducted by the Office of the United States Attorney for the Southern District of New York that concern Goldman Sachs. Documents sufficient to show currently active investigations being conducted by the United States Department of Justice (except those in the Southern District of New York) that concern Goldman Sachs. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 Commission File Number: 001-14965 The Goldman Sachs Group, Inc. (Exact name of registrant as epectiod tn is charter) Delaware 19-4019460 (State or othor jurisdiction of (RS. Employer Incorporation of organiztlon) ‘nication No) 200 West Street 10282 New York, N.Y. ip Code) (Adaress of principal executive oices) (212) 902-1000 (Registrants talephona number, including area code) Securities registered pursuant to Section 12(b) of the Act: Tile of each clas 2 of each exchange on which regetare: Common stock, par valuo $.01 por share ‘New York Stock Exchange Depositary Shares, Each Representing 1/1,000th Interest In a Share of Floating Rata Now York Stock Exchange Non-Cumulative Preferred Stock, Series A Depositary Shares, Each Representing 1/,000th Interest Ina Share of 6.20% Now Vork Stock Exchango Non-Cumblative Proferred Stock, Serles 8 Depositary Shares, Each Representing 1/,000th Interest In a Shara of Floating Rat New York Stock Exchange Non-Cumulative Preferred Stock, Series C Depositary Shares, Each Ropresonting 1/,000th Interest in a Shara of Floating ato ‘Now York Stock Exehango Non-Cumulative Preferred Stock, Serlos D 709% Flxad-to-Foating Rato Normal Automatic Preferred Enhariced Capital Socurities of "Now York Stock Exchange Goldman Sachs Capital lt (and Rogistant’s guarantee with respect thereto) Floating Rate Normal Automalio Proterrod Enhancod Capital Securities of Goldman Sachs Now York Stock Exehango Capita i (and Registrants guarantee with respect thereto) Hodlurm-Torm Notes, Serie B, Index-Linkod Notes due February 2013; Indox-Linkod Notas NYSE Amex. ‘due April 2019; I Index-Linked Notes cue 2011 Hodlum-Term Notes, Series B, Floating Rate Notes cue 2011 Now York Stock Exehange ‘Modlum-Torm Notes, Series 2097 of GS Finance Corp. NYSE Arca (and Registrant's quaranteo wi Mediun-Term totes, Seles B, NYSE Arca Medlum-Term Notes, Serie D, 7.50% Notes duo 2019 ‘York Stock Exchange 8.125% Notes dup 2060, Now York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Inleat by chock mark the ragiskant Isa wolHkrown seasoned issuer, as defined in Rule 405 ofthe Securios Ack. ves Ne LT Ingeate by chock mark to roses not requ othe opts pursuant to Secon 13 0156 of ho At ves TO Ne Indcate check makwhther th rita (1 hes ld el ports equced ote fled by Sat 19 or 1) of he Secures Exchange At of 1904 “during the proveding 12 months (or for such shorter pared that he regiseanl was fequled fle such reports), and (2) has bson eubjoct to such flog {eau ropa 0 ca Yon EN Indcate by check ma nbotor tho relat has submited eloronicaly and posted an ls corporate Web ste ny, ever lratve Da Fle requredie be aubmited anaposted pursuant o Rule 4050! Regulation dug Ina precoding 12 mor (fr such shocarporod that tho registrant was {agate unm an post sven Ha) i oa. inleae by chock markt ielosure of delinquent exe pursuent to lle 405 of Regulton &-K isnot containesheren, andi not be contalnog, othe best of ragistant's knowl, in doa proxy or information slalerments incorporated by relerence In Patil the Aatusl Report on Fou 10-K or ay Amonmont to the Anrwal Report on Ferm 10K. EL Inaleao by check markwhetnorheregltvaile alate acelertod fer, an accooraed lta ncn-accoleraledr or asmalereportng company. Soo the dotintons of "ergo accelerated tle” “accelerated iter ane “smallrepering company” ih Mule 122 ofthe Exchange Ac. oroe acderaad ter Acoltedifer "Non-acneraeaer Go nother fa spate epeing company) Smalerregeringcomeany C Insite by check mark whether the registrants a shell compary (as defined In ule 120-2 ofthe Exchange AD), Yes" Fe ef tne 30, 2070, he aggroato has! va of th concn soos Oe regan held by novallats of he regan wes approximately $86.7 bien. ‘As of Fotruary 11,2011, thoro wero 820,507,295 shares ofthe rogisrante common stock oustanding, Documents Incorporated reterenee’ Porionso! The Glsmen Sues Grou, e's en Salmo 2011 Arqual Mean of Sharhotore to be hei on May 8, 2071 ate Inearpariod by ference inthe Anal Report on Form 0K in response to Patil, eens 10,1, 12,18 and I ‘THE GOLDMAN SACHS GROUP, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010 INDEX Form 10-K item Number PARTI Item 4 itom 44 item 18 item 2 Item 3 PARTI item 5 item 6 item 7 item 7 item 8 itom 9 tem 9A tem 98 PART ill Hem 10 tem tt Wem 12 item 13 tem 14 PART iv Item 18 Business Introduction ‘Our Business Segments and Segment Operating Resuits investment Banking institutional Cllent Services. Investing & Lending Investment Management Business Continuity and information Security Employees, Competition Regulation Available Information Cautionary Statement Pursuant io the U.S. Private Securities Litigation Reform Act of 1995, Risk Factors Unresolved Stati Comments Propertios Legal Proceadings Executive Otticers of The Godman Sachs Group, Inc. ‘Market for Ragistrant’s Common Equity, Related Stockhoider Maiters and Issuer Purchases of Equily Securttios ‘Selected Financial Data ‘Management's Discussion and Anaiysis of Financial Condition and Results of Operations, Quantitaiive and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data ‘Changos in and Disagreements with Accountants on Accounting and Financial isclosure Controls and Procedures Other Information Direotors, Executive Officers and Corporate Governance Executive Compensation ‘Security Gwnership of Certain Beneficial Owners and Management and Related Stockholder Matters Gertain Relationships and Related Transac Principal Accountant Fees and Services is, and Director independence Exhibits and Financial Siatement Schedules SIGNATURES 35 96 97 213, 213 213. 213, 213 213 214 214 214 215 218 tit ‘THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 30. Legal Proceedings ‘The fitm is involved ina number of judicial, regulatory and arbitration procesdings (including those described below) concerning mattors arising In connection with the conduct of th firm’s businesses, Many of these proceedings are at proliminary stages, and many of these cases seok an indeterminate amount of damages. With respect to mattors doscribed below, management has estimated the upper end of the range of reasonably possiblo loss as being equal to (i) the amount of money damagos claimed, where applicable, (I the amount of soouritios that the firm sold in’ cases. involving Uunderwritings where the firm is being sued by purchasers and is not being Indemnified by a party that the firm believes will pay any |udgment, or (Ii) in cases where the purchasers are demanding that the firm repurchase securities, the price that purchasors paid for tho eocuritios loss the estimated valuo, itany, as of December 2010 of the relevant securitios. As of December 2010, the firm has ostimated the aggregate amount of reasonably possible losses for these matters to be approximately $3.4 billion. Under ASC 450 an event Is “reasonably possible’ i “the chance of the future event or events occurring Is more than remote but loss than likely" and an event is, “remote” If “the chanco of tho future event or events: ‘occurring is slight". Thus, roforoncesto the upper end of the rango of reasonably possible loss for cases in which the firm is ablo to estimate a range of reasonably possiolo oss moan the upper end of the range of loss for cases for which the firm bolioves the risk of loss is more than slight, The amounts reserved against such matters are not significant as compared to the Upper end of the range of reasonably possible loss. Management is unable to estimate a range of reasonably possible loss for cases deseribed below in which damages have not been specified and (!) the proceedings are in early stages, (i) there is Uncertainty as to the likelihood of a class. being certified or the ultimate size of the class, (il) there is Uncertainty as to the outoomo of ponding appeals or motions, (Wv) thore aro significant factual Issues to bo Tosolvod, andlor (v) there are novel legal Issues presented. However, for these cases, management does not believe, ‘based on currently evallable information, that the outcomes of these proceedings will have a material advorse offect on the firm’ financial condition, though the outcomes could be material tothe firm's operating results for any particular period, depending, in part, upon the operating results for such period 191 IPO Process Matters. Group Inc. and @S&Co. are ‘among the numerous financial sorvices companies that have been named as defendants in a varialy of lawsuits alleging improprieties in the process by which those ‘companies participated in the underwriting of public offerings in recent years. GS&Co. has, together with other underwriters in certain offerings as well as the Issuers and cortain of thelr officers and directors, been named as a defendant in a number of related lawsuls filed in the U.S. District Court for tho Southom District of New York alleging, among ther things, that the prospectuses for the offerings violated the federal securities laws by failing to disclose the existence of alleged arrangements tying allocations in certain offerings to higher customer brokerage commission rates as well as purchase ‘orders In the aftermarket, and that the alleged ‘arrangements resulted in market manipulation, On October 5, 2009, the district court approved a settlement agroomont ontered into by the parties. Tho tir has paid into a settlement fund the full amount that ‘@S&Co. would contribute in the proposadsottlement. On October 23, 2009, certain objectors filed a pottion in tho U.S. Court'of Appeals for the Second Circuit secking review of the district courts certification of a class for purposes of the settlement, and various objectors appealed cortain aspects of the seltlement’s approval. Certain of the appeals have been withdrawn, and on December 8, 2010, January 14, 2011 and February 3, 2011, plaintifs moved to dismiss the remaining appeals, GSACo. is among numerous underwriting rms named as dofondants in a number of complaints tiled ‘commencing October 3, 2007, in the U.S. District Court for the Western District of Washington alleging violations of Section 16 of the Exchango Act in ‘connection with offerings of secutiies for 15 issuers ‘during 1999 and 2000, The compiaints gonorally assert that the underwriters, together with each issuer's directors, officers and principal shareholders, entered into purported agreements to tie allocations in tho offerings to increased brokerage commissions and aftermarket purchase orders. The complaints further allege that, based upon these and other purported agreements, the underwriters violated the reporting provisions of, and are subject to short-swing profit recovery under, Section 16 of the Exchange Act. The district court granted defendants’ motfons to dismiss by ‘a decision dated March 12, 2008. On December 2, 2010, ‘the appellate court affirmed in part and reversed in part, upholding the dismissal of ‘THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) seven of the actionsin which GS&Co. is a defendant but remanding the remaining eight actions in which GS&Co. is a defendant for consideration of other bases for dismissal. On December 16, 2010, the underwriters and the plaintif fled petitions for rehearing andior rehearing en banc, which were denied on January 18, 201. The Issuance of the mandate has been stayed to permit the parlies to sesk Supreme Court review. GSACo. has been named as a defendant in an action commenced on May 15, 2002 in New York Supreme Court, New York County, by an official committee of ‘unsecured creditors on behalf of eToys, inc., alleging that the frm intentionally underpriced eToys, Inc's intial public offering. The action seeks, among other things, ‘unspecified compensatory damages resulting rom the alleged lower amount of offering proceeds. The court granted GS&Co's motion to dismiss as to five of the Claims; plainif appealed from tho dismissal ofthe fivo claims, and GS&Co, appealed from the denial of its motion as to the remaining claim. The New York Appellate Division, First Department affirmed in part andreversedin part the lower court's ruling on the firm's motion to dismiss, permitting all claims to proceed except the claim for fraud, as to which the appellate ‘court granted leave to replead, and the New York Court ‘of Appoals affirmed In part’ and reversed in part, dismissing claims for broach of contract, professional malpractica and unjust enrichment, but permitting dlaims for breach of fiduciary duty and fraud 10 ‘continue. On romand to tho lower court, GS&Co. moved to dismiss the surviving claims or, in the alternative, for summary judgment, but the motion was denied by a decision dated March 21, 2008, and the court subsequently permitted plant to amend the complaint again. On November 8, 2010, GS&Co's motion for summary judgment was granted by the lower court; plaintiff has appealed. Group Inc, and certain of te affitates have, together with various underwriters In certain offerings, recalved subpoenas and requests for documents and information from various governmental agencies and self-regulatory organizations in connection with Investigations relating to the public offering process. Goldman Sachs has cooperated with these. Investigations. World Online Litigation. In March 2001, a Dutch shareholders association initiated legal proceedings for an unspecified amount of damages against GSI and others In Amsterdam District Court In connection with the initial public offering of World Online in March 2000, alleging misstatements and omissions in 192 the offering materials and that the market was artificially inflated by improper public statements and stabiliz activities. Goldman Sachs and ABN AMRO Rothschild served as joint global coordinators of the approximately €2.9bllion offering, GSI underwrote 20,268,846 shares and GS&Co. underwrote 6,756,282 shares for a total offering price of approximately €1.16 billion The distriat court refected the claims against GS! and ABN AMRO, but found World Online labie in an amount to be determined. On appeal, the Netherlands Court of Appeals affirmed in part and reversed in part the decision of the district court holding that certain of the alleged disclosure deficiencies were actionable as to @SI and ABN AMRO. On further appeal, the Netherlands Supreme Court on November 27, 2003 affirmed the rulings of the Court of Appeals, except found certain additional aspects of the offering matorials actionable and hold that GSI and ABN AMRO could potentially bo held responsible for certain public statements and pross roleases by World Online and its former CEO. On November 18, 2010, the parties reached a settlement in principle, subject to documentation, pursuant 10 which GSI’ will contribute up to €48' millon to a settlement fund, The firm has reserved the ful amount of GSI's proposed contribution to the sottlomont Research Matters. GS&Co. Is one of several investment firms that have been named as dofendants in substantively identical purported class actions fied in the U.S. District Court for the Southern District of Now York alleging violations of the federal socurities laws in connection with research coverage of ‘certain Issuers and seeking compensatory damages. ‘One such action, relating to coverage of RSL Communications, Inc., commenced on July 15, 2003. The parties ontored into a sottiomont agrooment on ‘August 23, 2010, which recolved final court approval ‘on February 23, 2011. Undor tho sottlomont agraomont, GS&Co. paid approximately $3.98 milion. Group Inc. and GS&Co. were named as defendantsin a purported class action filed on July 18, 2003.0n behalf of purchasers of Group inc. stock from July 1, 1999 through May 7, 2002. The complaint in the US, District Court for the Southern District of New ‘York, alleged that defendants breached thelr fiduciary duties and violated the federal securities Jaws in connection with the firm's research activites and sought, among other things, unspecified compensatory damages and/or rescission. On July 12, 2040, the parties entered into a settlement agreement pursuant to which the seillement has ‘THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) been funded by the firm's insurers, The settlement received court approval on December 15, 2010 and has become final. Group Inc. and certain of its afflates are subject to @ number of Investigations and reviews by various governmental and regulatory bodies and self-regulatory organizations rolating to research practices, including communications among research analysts, sales and trading personnel and clients. Goldman Sachs is cooperating with the investigations and roviows. ‘Adelphia Communications Fraudulent Conveyance Litigation. GS&Co. is among numerous. ontitios named as defendants in two adversary proceodings commenced in the US. Bankruptoy Court for the Southern District of New York, one on July 6, 2008 by a creditors commities, and the second on or about July 31, 2008 by an equity commitioe of Adelphia Communications, inc. Those proceedings have now been consolidated in a single amended complaint filed by the Adelphia Recovery Trust _ on October 31, 2007. The complaint seeks, among other things, to’ recover, as. fraudulent conveyances, payments made' allegedly by Adelphia Communications, Ine. and its affilates 10 cortain brokerage firms, including approximately $62.9 milion allegedly paid to GS&Co,, In rospoct of margin calls ‘made in the ordinary course of businoss on accounts ‘owned by mombers ofthe femily that formerly controlled ‘Adelphia Communications, Inc. By a decision dated June 15, 2009, the district court required plaintif to amend ts complaint to specity the source of the margin paymenis to GS&Co. By a decision dated July 80, 2008, tho district court held that the sufficiency. of | the amended claim would bo determined at the summary judgment stage. On March 2, 2010, GS&Co. moved for summary judgment. Specialist Matters. Spear, Losds & Kellogg ‘Specialists LLC (SLKS) and cortain affiliates have ecelved requests for information from various governmental agencies and —_ self-regulatory organizations as part of an industry-wide investigation relating to activities of floor specialists in recent years. Goldman Sachs has cooperated with the requests. 193 (On March 90, 2004, certain specialist firms on the NYSE, including SLKS, without admiting or denying the allegations, entered into a final global settlement with the SEC and the NYSE covering certain activities during the years 1999 through 2003, The SLKS settlement Involves, among other things, () findings by the SEC and the NYSE that SLKS viotated certain federal securities laws and NYSE rules, and in some cases failed fo supervise certain individual specialists, in connection with trades that allegedly cisacvantaged customer orders, (i) a cease and desist order against SLKS, (ii) @ censure of SLKS, (iv) SLKS’ agreement to pay an aggregate of $45.3 milion indisgorgement anda penalty to be used to compensate customers, (v) cortain undertakings with respect to SLKS' systems and procedures, and! (vi) SLKS' retention of fan independent consultant to review and evaluate certain of SLKS’ compliance systems, policies and procedures. Comparable findings were made and sanctions. imposed in the settlements with other specialist firms, The settlement did not resolve the rolated private civil actions against SLKS and other firms or regulatory Investigations involving individuals ‘or conduct on other exchanges. SLKS, Spear, Leads & Kellogg, L.P. and Group Ine. are ‘among numerous defendants named in purported class actions brought beginning in October 2003 on behalt of Investors in the U.S. District Court for the Southern District of New York alleging violations of the federal securities laws and state common law in connection with NYSE floor specialist activlies. The actions, which have been consolidated, seek unspecifiod ‘compensatory damages, restitution and disgorgement (on behalf of purchasers and sellers of unspecified secu between October 17, 1998 and Ociober 15, 2003. By a decision dated March 14, 2009, the district court granted plaintiffs’ motion for class cerifeation. The defendants’ petition ‘with the U.S. Court of Appeals for the Second Circuit ‘seeking roviow of the certification ruling was denicd by fan order dated October 1, 2009. The specialist defendants" petition for a rehearing and/or rehearing ‘en bane was denied on February 24, 2010. ‘THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Treasury Matters. GS&Co. has been named as a defendant in a purported class action filed on March 10, 2004 in the US. District Court for the Northern District of Mlinois on behalf of holders of short posiions in 30-year U.S. Treasury fulures and options on the moming of October 31, 2001. Tho complaint alleges that the firm purchased 90-yoar bonds and futures prior to a forthcoming Treasury refunding announcement that morning based on non-public information about that announcement, anc that such purchases increased the costs of covering such short positions. The complaint also names as defendants the, Washington, 0.C.-based_poltcal consultant who’ allegedly was the sourco of tho information, a former GS&Co. cconomist who allegedly feceived the information, and another company and one of its employees who also allegedly recelved and traded on tho information prior to ils pubic announcement. The complaint alleges Violations of tho federal commosities. and antitrust laws, a3 well as Mlinols statutory and common law, ‘and Seeks, among othor things, unspecified damages including teeble damages under the antitrust laws. The district court dismissed the antitrust and Minois state Jaw clalms but permitted the fodoral commodities law claims to proceed. Plaintit's motion for class certiicaon was denied by a decision dated ‘August 22, 2008, GS&Co. moved for summary judgment, and tho district court granted the motion but only insofar as the claim relates to the trading of treasury bonds. On October 13, 2009, the parties floc an offer of judgment and notice of acceptance with respect to plaintl's individual claim, On Docombor 11, 2009, tho plaintif purported to appeal ‘with respect to the district court's prior donial of class cetication, and GS&Co, moved to dismiss the appoal con January 25, 2010. By an order dated April 13, 2010, the U.S. Court of Appeals for the Seventh Circuit ruled that GS&Co's motion would be entertained together with the meris of the appeal. Mutual Fund Matters. GS&Co. and certain mutual {und affiliates have received subpoenas and requests {or Information from various governmental agencies and self-regulatory organizations including the SEC as part of the industry-wide investigation rolating to the practices of mutual funds and thelr customers. GS&Co, and its affiliates have cooperated with such requests. 194 Retco Securities Litigation. GS&Co. and the othor lead underwriters for the August 2005 initial public offering of 26.5 milion shares of common stock of Refco Inc. are among the defendants in various Dutave class actions filed In the U.S. District Court for the Southern District of New York beginning in October 2006 by investors in Rofco Inc. in rosponso {ocertain publicly reported events that culminatedin tho October 17, 2005 fling by Refco Ine. and certain afiiates for protection under US. bankruptcy laws. The actions, which have been consolidated, allege violations of the disclosure requiremonts of tho federal secures laws and scek compensatory damages. In addition to tho undorwritors, the consolidated complaint namos as defendants Refeo Inc. and certain of its affiliates, certain officers and directors of Refco Inc., Thomas H. Lee Partners, LP. (which held a majority of Refco Inc's equity through certain unds it manages), Grant Thornton (Refeo Inc's outside auctor), and BAWAG PS.K. Bankfur Arbeltund Wirschaft und Osterreichische Postsparkasse Aktiengosellschatt (BAWAG). Lead plaintifs entered into @ settlement with BAWAG, which was approved following certain amendments on June 29, 2007. GS&Co. underwrote 5,639,200 shares of common siock at a price of $22 per share for a total offering price of approximately $124 milion. On April 20, 2010, cortain underwriting defendants Including GS&Co. ‘tered into a seltiement of the action, pursuant to which they wil contibute $49.5 milion to a sottioment fund. The seitlement received court approval on October 27, 2010 and has become final GS&Co. has, together with other underwriters of the Reico inc. intial public offering, recolved requests for information from various governmental agencies and self-regulatory organizations. GS&Co. has cooperated with those requests, Fannie Mae Litigation. GS&Co. was ackled as a defendant in an amended complaint filed on ‘August 14, 2008 in a purported class action pending Inthe U.S. District Cour for the District of Columbia, The complaint asserts violations of the federal securities laws generally atising trom allegations concerning Fannie Mae’s accounting practices in connection with certain Fannie Mae-sponsored REMIC. transactions that were allegedly arranged by GS&Co. The complaint does not specify @ dollar amount of damages. The othor defendants include Fannie Me, certain ofits pastand present officers and directors, and accountants, By @ decision dated May 8, 2007, the ‘THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cor district court granted GS&Co's motion to dismiss the claim against it. The time for an appeal will not begin to run until disposition of the claims against other defendants. Beginning in September 2006, Group Inc. and/or GS&Co. were named as defendants in four Fannie Mao shareholdor derivative actions in the U.S, District Court for the District of Columbia. The complaints generally allege that the Goldman Sachs defendants aided and abetted a breach of fiduciary duty by Fannie Mae's directors and officers in connection with certain Fannie Mae-sponsored REMIC transactions and one of the complaints also asserts a breach of contract claim, ‘The complaints also name as defendants certain former officers and dlrectors of Fannie Mae as well as an ‘outside accounting firm. The complaints seek, inter alla, unspecified damages. The Gokiman Sachs defendants were dismissed without prejudice from tho first fled of these actions, and the remaining claims in that action were dismissed for allure to make a demand ‘on Fannie Mae's board of directors. That dismissal has been attitmned on appeal. The district court dismissed ‘ne romaining threo actions on July 28, 2010. The plaints filed motions for reconsideration, wich were deniod on October 22, 2010, and have revised their notices of appeal in these actions. Compensation Related Litigation, OnJanuary 17,2008, Group Inc,, its Board, executive officers and members of is management committee were named as Gfendanis in a_ purported. shereholder derivative action In the US. District Court for the Eastern District of New York predicting that the fm’s 2008 Proxy Statement will vioiato tho fodoral securities laws by undervaluing cortain stock option awards and alleging that senior managomont received excessive ‘compensation for 2007. The complaint seeks, among ‘other things, an injunction against the dstiouion of the 2008 Proxy Statement, the voiding of any election of directors In the absence of an injunction and an ‘oquitablo accounting for the allegedly. excassive compensation. On January 25, 2008, the plaint moved for preliminary Injunction to provent the 2008 Proxy Statement from using options valuations thatthe plaintiff alleges are incorrect and to require the amendment of SEC Form 4s filed by certain of the executive officars named in the complaint to reflect the stock option valuations alleged by the plain Plaintif’s motion for a proliminary Injuncton was donied, and plaintif’s appeal from this denial was dismissed, On February 13, 2009, the plant fled an 195 ued) amended complaint, which added purported direct {(e,, non-derivative) claims based on substantially the same theory. The plaintiff fled @ further amended complaint on March 24, 2010, and the defendants’ motion to dismiss this’ turlher amended complaint was granted on Soptombor 30, 2010. On Octobor 22, 2010, the plaintif fled a notice of appeal ‘rom the dismissal of his complaint On March 24, 2009, the same plaintiff filed an action in Now York Supreme Court, New York County against Group Ine, its drectors and certain senior executives alleging violation of Delaware statutory and common law i connection wth substantively similar allegations regarding stock option awards. On April 14, 2009, Group Inc. removed the action to the U.S. District Coun for the Southern District of Now York and has moved to transfer to the dlstict court judge presiding ‘over the athor actions dosorbod inthis section and to dismiss. The action was transferred on consent to the US, District Cour forthe Eastern District of Neve Yor, vwhere defendants moved to cismiss on April 23, 2008, On July 10, 2009, plant moved to remand the action to state court, and this motion was granted on daly 28, 2010, On January 7, 2011, the plant fled an amended complaint, Purported shareholder derivative actions have been commenced in Now York Supreme Court, New York County and Delaware Court of Chancery beginning on December 14, 2008, alleging that the Board breached its fiduciary duties in connection with setting compensation levels for the year 2009 and that such levels are excessive. The complaints name as defendants Group inc., the Board and certain senior executives. The complaints seek, inter alfa, unspecified damages, restitution of certain compensation paid, and an order requiring the firm to adopt corporate reforms. In the actions in New York state court, on April 8, 2010, the plainlffs fled @ motion indicating that they no longer intend to pursue their claims but are seeking an award of attorney's fees in connection with bringing the sult, Which the defendants have opposed. In the actions brought in the Delaware Court of Chancery, the defendants moved to aismiss on March 9, 2010, and the plaints amended their complaint on Apri'28, 2010 0 Include, among other things, the allegations included in the SEC's action described in the "Morlgage-Related Mattors’ soction below. The defendants moved to dismiss this amended complaint on May 12, 2010. In lieu of responding to defendants’ motion, plantifs moved (on December 8, 2010 for permission to fle a further ‘THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) amended complaint, which the defendants had opposed. The court granted plaintifs' motion to amend on January 19, 2011, and the defendants moved to dismiss the second amended complaint on Fobruary 4, 2011, Group Inc. and certain of is atfilates aro subject to a number of Investigations and reviews from various governmental agencies and __self-egulatory Organizations regarding the firm's compensation processes. Tho fim is cooporating with tho investigations and reviews. Mortgage-Related Matters. On April 16, 2010, the SEG brought an action (SEC Action) under’ the US. federal securities iaws in tho U.S. District Court for the Southern District of New York against GS&Co. and Fabrice Tourre, one ofits employees, in connection with a CDO offering made in early 2007 (ABACUS 2007-AC transaction), alleging that the defendants made materially faiso and misleading statements to Investors and seeking, among other things, Uunspecitiod monotary penalties, Investigations of GS&Co. by FINRA and of GSI by the U.K. Financial Services Authority (FSA) were subsequently Iniiated, and Group inc. and certain ofits afliates have received requests for information from other regulators, fogarding CDO offerings, including the ABACUS 2007-AC1 transaction, and related matters. On July 14, 2010, GS&Co. entered into a consent agreement with the SEC, settling all claims made against GS&Co. in the SEC Action (SEC Settlement), Pursuant 10 which, GS&Co. paid $550 milion of disgorgement and civil penalties, and which was approved by the U.S. District Court for the Southern District of New York on July 20, 2010. On September 9, 2010, the FSA announced a settlement with GSI pursuant to which the FSA found that GSI violated certain FSA principles by falling to (0) provide notiication about the SEC Wells. Notice issued to Mr. Tourre (who worked on the ABACUS 2007-AC1 transaction but subsequently transferred to GSI and became registered with the FSA) and (i) have procedures and conttols to ensure thal GSls ‘Compliance Dopariment would be alerted to vatious aspects oi the SEC investigation sos o beina position to determine whether any aspects were reportable to tho FSA. The FSA assessed a fine of £17.5 milion. (On November 9, 2010, FINRA announced a settlement ‘with @S&Co. relating to GS&Co’'s failure to file Form U4 Updates within 20 days of learning ofthe receipt of Wells 198 Notices by Mr. Tourte and another employee as well as deficiencies inthe firm's systems and controls for such flings. FINRA assessed a fine of $850,000 and GS&Co. agreed to undertake a review and remediation of the applicable systems and controls. On January 6, 2011, ACA Financial Guaranty Corp. filed an action against GS&Co. in respect of the ABACUS 2007-AC1 transaction in New York Supreme Court, Now York County. The complaint Includes allegations of fraudulent inducement, fraudulent concealment and unjust enrichment and ‘se0ks at Joast $30 milion in compensatory damages, at least $90 million in punitive damages and unspecified disgorgement, Since April 22, 2010, a number of putative shareholder ‘derivative actions havo been fled in New York Supreme Court, New York County, and the U.S. District Court for the Southern District of Now York against Group Inc., the Board and certain officers and employees of Group Inc. and ts alfilates in connection with mortgage-related matters between 2004 and 2007, including the ABACUS 2007-AC1 transaction and other CDO offerings. These derivative complaints generally include allegations of breach of fiduciary duty, corporate waste, abuse of control, mismanagement, unjust enrichment, misappropriation finformation, secures fraud and insider trading, and challenge the accuracy and adequacy of Group ine’s disclosure, These derivate complaints seok, among other things, declaratory relief, unspecified compensatory damages, restitution and certain corporate governance reforms. The New York Supreme Court has consolidated the two actions pending In that court. Certain plains In the federal ‘court cases have moved to consolidate theso actions ‘and to appoint lead plaintit and lead counsol. in addition, as described in the “Compensation-Related Litigation’ section above, the plaints in the compensation-olated Delaware Court of Chancery actions have amended their complaint to assert, among other things, allegations similar to those in the orivative claims roferred to above, the defendants moved to dismiss this amended complaint, and the plainttfs then sought permission to amend further, ‘hich the court granted on January 19, 2011. The defendants moved to dismiss the second amended ‘complaint on February 4, 2011 THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Since April 23, 2010, the Board has received lelters from shareholders demanding that the Board take action to address alleged misconduct by GS&Co., the Board and certain officers and empioyaes of Group Inc. and its affiliates, The demands generally allege misconduct in connection with the ABACUS 2007-AC1 transaction, tho alleged allure by Group Inc. to adequately disclose the SEC investigation that led to the SEC Action, and Group Inc's 2009 compensation practices. The demands include a letter from a Group Inc. shareholder, which previously made a demand that the Board investigate and take action in connection with auction producis matters, and has now expanded Its demand to address the foregoing matters. The Board previously rejected the demands relating to auction products matters. In addition, beginning April 26, 2010, a number of purported securiies law class actions have been filed Inthe U.S, District Court for the Souther District of Now York challenging the adequacy of Group Inc:s public disclosure of, among other things, the firr’s activiies in the CDO market and tho SEC investigation that led to the SEC Action. The purported class action complaints, which name as defendants Group Inc. and certain officers and employees of Group Inc. and its afiliates, generally allege violations of Sections 10(b) ‘and 20(a) of the Exchange Act and seek unspecified damages. On Juno 25, 2010, certain shareholders and groups of shareholders moved to consolidate these actions and to appoint lead plaintiffs and lead counsel. GS8Co., Goldman Sachs Mortgage Company and GS Mortgage Securities Corp. and three current or former Goliman Sachs employees are defendants in a putative lass action commoneed on December 11, 2008 in the US. District Court for the Southern District of Now York brought on behalf of purchasers of varlous mortgage pass-through certificates and asset-backed certilicates Issuad by various socuritization trusts in 2007 and underwritten by GS&Co. The second amended complaint gonorally alleges that tho registration statement and prospectus supplements for the certificates violated the federal securities laws, and seeks unspecified compensatory damages and rescission or recassionary damages. Defendants’ motion to dismiss the second amended complaint was granted on January 28, 2010 with leave to ropioad cortain claims. On March 31, 2010, the plaintiff fed a third amended complaint relating to ‘wo offerings, which the defendants moved to dismiss ‘on June 22, 2010. This motion to dismiss was deniedas 197 to the plant's Seotion 12(a)(2) claims _ on September 22, 2010, and granted as to the plainti's Section 11 claims on October 15, 2010, and the plaints motion for reconsideration wes denied on November 17, 2019. On December 9, 2010, the plaintiff fled a motion for entry of final judgment or corttication of an interiocutory appeal as to plaintif’s Section 11 clams, which was denied on January 11, 2011. On Juno 3, 2010, another investor {who had unsuccessfully sought to Intervene in the action filed a separate putative class action asserting substantively similar allegations relating to an adaiional offering pursuant to the 2007 registration statement. The dofendants moved to dismiss this separate action on November 1, 2010. GS&Co. underwrote approximately $951 milion. principal amount of certificates to all purchasors in tho offorings at Issue inthe complaint (exciuaing those offerings for which the clalms have been aismissed). Group inc, GS&Co, Goldman Sachs Mortgage Company and GS Mortgage Securities Corp. are among the defendants in a separate putative class action commenced on February 6, 2009 in the US. District Court for the Southem District of Now York brought on behalf of purchasers of various mortgage pass-through certificates and assot-backed certificates issued by various securlizetion trusts in 2006 and underwritten by GS&Co. The other defendants include three current or former Goldman Sachs employees and various rating agencies. The second amended complaint generally alieges that the registration statement and prospectus supplements for the cortficates violated the federal securities laws, and ‘seeks unspecified compensatory and rescissionary damages. Defendants moved to dismiss the second amended complaint. On January 12, 2011, the district court granted the motion to dismiss with’ respect 10 offerings in which plaintiff had not purchased securities, but denied the motion to dismiss with respect to a single offering in which the plaintitt allegedly purchased securities, GS&Co. undonwrote approximately $698 millon principal amount of certificates to all purchasers in the offerings at issue in he complaint (excluding those offerings for which the claims have been dismissed), (On September 30, 2010, a putative class action was filedin the U.S, District Court for the Southern District of New York against GS&Co., Group Ine. and two former GS&Co. employees on behalf of investors in notes issued in 2008 and 2007 by two synthetic CDOs (Hudson Mozzanine 2008-1 and 2006-2). The ‘THE GOLDMAN SACHS GROUP, INC, and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) complaint, which was amended on February 4, 2011, assorts federal securities law and common law claims, and seeks unspecified compensatory, punitive and other damages. Various alleged purchasers of, and counterparties involved in transactions relating to, mortgage pass-through certlicates, CDOs and other ‘mortgage-related products (inoluding the Federal Home Loan Banks of Seale, Chicago and Indianapols, the Charles Schwab Corporation, Cambridge Place Investment Management Inc., Basis Yield Alpha Fund (Master) and Landesbank Badon-Warttemborg, among thers) have filed complaints in state and federal court against firm affilates, generally alleging that the offering documents for the’ secures that they purchased ‘contained untrue statements of material facts and material omissions and generally seeking rescission and damages. Certain of these complaints also name ‘other firms as defendants. Adcitionally, the National Credit Union Administration (NCUA) has stated thal it Intends to pursue similar claims on behall of certain credit tunions for which it acts as conservator, and the firm anc the NCUA have ontorod into an- agreement tolling the rolovant statutes of Imitation. A number of othr entitios have threatened to assort claims against the fitm in ‘connection with vatious mortgage-related. offerings, and the firm has entered into agreements with a number of these entities to toll the relevant statute of limitations. The firm estimates, based on currently available Information, that the ‘aggregate cumulative losses experienced by the plaintifs with respect to the securities at Issue in active cases brought agains! the firm where purchasers are seoking rescission of mortgage ‘olatod socuritios was approximately $487 milion as of Docomber 2010, This amount was calculated as the aggregate amount by which the initial purchase price for the securities allegedly purchased by the plaintits exceeds the eslimated Decomber 2010 value of those securilles. This estimate does not include the potential NQUA claims or any claims by other purchasers in the same of olher morigage-elated offerings that have not actually brought claims against the firm. ‘The firm has also received requests for information from regulators relating to the mortgage-related securitization process, subprime mortgages, CDOs, synthetic ‘mortgage-related products, particular transactions, and servicing and foreclosure activities, and is cooperating with the requests. The firm expects to be the subject of additional putative sharoholder derivative actions, purported class actions, rescission and "put back" claims and other Itigation, 198 additional investor and shareholder demands, and additional regulatory and other investigations and actions with respect to mortgage-related offerings, loan sales, CDOs, and servicing and foreclosure actives. Soe Noto 18. for further information regarding mortgage-retated contingencies. GS&Co,, along with numerous other financial institutions, isadoferdantin an action broughtby the City of Cievelanc alleging thatthe defendanis’ actives in connection wih securizations of subprimo mortgages created a “public nuisance" in Cleveland. The action is ponding In tho USS, District Court forthe Norther District of Ohio, and tho complaint seeks, among other things, unspectiod ‘compensatory damages. The dlrict court granted defendants’ motion to clstniss by a decision dated May 15, 2009. The Gity appealed on May 18, 2008. The appellate court affirmed the complaints dismissal by a decision dated July 27, 2010 and, on October 14, 2010, denied the ‘Cilys pettion for rehearing en banc. On January 12, 2011, the City fled -apattion for wit of certiorari withthe U.S. Supreme Court ‘Auction Products Matters. On August 21, 2008, GSRCo, entered info a settlement in principlo with the Office of the Attorney General of the Stale of New York and the liino's Securities Department (on behalf of the NorihAmorican Secutifes Administrators Association) regarding auction rate socurios. Under the agreement, Goldman Sachs agreed, among other things, ()t0 offer to Tepurchase at par tho outstanding auction rate securities that its privato wealth management clients purchased through the firm prior to February 11, 2008, with the ‘exception of those auction rate securities where auctions are clearing, {i) to continuo to work with issuers and other interested partie, including regulatory and governmental entities, 10 expeditiously provide liquidity solutions for institutional investors, and (li) to pay 2 $22.5 millon fine. ‘The settlement is subject to definitive documentation and approval by the various states. On Juno 2, 2008, GS&Co. ‘entered Info an Assurance of Discontinuance withthe Now ‘York State Attorney General. On March 19, 2010, GS&Co. ‘entered into an Administratve Consent Order with the llingis Secretary of State, Securities Department, which hhad conducted an investigation on behalf of states other than New York, GS&Co has eniered into similar consent ‘orders with most states and is in tho process of doing s0 with the remaining states, (On August 28, 2008, a putative shareholder derivative action was filed in the U.S, District Court for the ‘Southern District of New York naming as defendants Group Inc., the Board, and certain senior officers. The ‘compiaint alleges generally that the Board breached its ‘THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) fiduciary duties and committed mismanagement in connection with its oversight of auction rate securitios marketing and trading operations, that certain individual defendants engaged in insider selling by selling shares of Group inc., and thatthe firm's public flings were false and misleading in violation ofthe federal securities laws, by failing to acourately disclose the alleged practices Involving auction rate securities. The complaint sooks damages, injunctive and declaratory reliel, restitution, and an order requiring the firm to adopt corporate roforms. On May 19, 2009, the district court granted dofondants’ motion to dismiss, and on July 20, 2008

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