Rebuidling and Preserving Reputation

The SEC may have a stake in regaining its credibility as a regulatory body, according to Law School professors.

“They are interested in trying to rehabilitate themselves,” said Fried, noting that the organization has suffered criticism for its handling of the Madoff fraud and the Bank of America litigations. “They have to show that they can shoot straight and that they have a role to play.”

Business School Professor Robin M. Greenwood said that Goldman is a “convenient target” for people who are looking for a scapegoat in the wake of the crisis.

For Goldman, reputation is also at stake, as well as the possibility of further legal actions on other transactions, Ferrell said. According to Law School Professor Howell E. Jackson, the SEC has a plausible case and Goldman will not be confident enough to go to trial. Ferrell, Jackson, and Fried said they believe that Goldman will settle.

But they acknowledged that much factual evidence has yet to be revealed.

“At the end of the day it will depend on the economic and legal merits of the case and rise and fall on that,” Ferrell said.

—Staff writer Tara W. Merrigan can be reached at tmerrigan@college.harvard.edu.

—Staff writer Zoe A. Y. Weinberg can be reached at zoe.weinberg@college.harvard.edu.

This article has been revised to reflect the following correction:

CORRECTION: April 21, 2010

An earlier version of the Apr. 21 news article "Professors Discuss Goldman Suit" incorrectly attributed to Law School Professor Allen Ferrell the statement that hedge fund manager John Paulson's speculation on future market movements likely did not constitute wrongdoing. In fact, Ferrell said that if Paulson had only made independent speculations, then his actions would not constitute wrongdoing.