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Money managers under the microscope

Paulson’s Goldman defense



As stock bets go it is no way the biggest and not particularly dramatic.

But the decision by Paulson & Co. to pick-up some 1 million shares of Goldman Sachs Group in the second-quarter may be some of the most fitting piece of Wall Street poetry to come out of this latest round of 13-F filings.

Of course Paulson’s fund will forever be linked with Goldman because it was the hedge fund at the heart of the Securities and Exchange Commission’s civil fraud case against the Wall Street bank. The SEC, in April, charged Goldman with failing to disclose that Paulson’s hedge fund had a hand in picking securities for a complex mortgage-related deal that the hedge fund was betting against.

And although regulators didn’t charge Paulson’s hedge fund with any wrongdoing, the manager’s name and his widely profitable bet shorting the U.S. housing market in 2007 did get a bit tarnished in the process. Goldman, on July 15, reached a settlement with the SEC over the civil suit, in which the Wall Street firm agreed to pay a $550 million penalty. The settlement came after the close of the second quarter, so Paulson took his stake in Goldman before the deal was done.

In the wake of the SEC lawsuit, Goldman shares traded as low as $131. Today, the stock closed at $147.67.