Australian Federal Election 2016: vote for us or the hospital gets it

Meme found on Twitter

Former Liberal MP and current Liberal candidate for the seat of Indi, Sophie Mirabella, once more demonstrates why she is considered by many to be unfit for office…..

The Age, 23 April 2016:

Those who hold public office in our democracy are vested with the high responsibility of public trust. As elected leaders, they must faithfully determine not just the direction of our nation, our states and neighbourhoods but the funding and delivery of vital community services. Their duty to serve the public is non-negotiable, and it takes precedence over all other concerns. On that, they must be held to account.

The Age raises this in light of astounding comments by the former Liberal member for Indi, Sophie Mirabella, that offer rare and dispiriting insights into dishonourable, cynical tactics that political parties adopt in election campaigns. During a community forum on Thursday, Ms Mirabella declared that the people of Wangaratta had been denied funding for an extension to the local hospital because the independent candidate, Cathy McGowan, had trumped her in the September 2013 election.

Ms Mirabella was responding to a question from Brendan Schutt, a local businessman, who is the chairman of the board at Northeast Health Wangaratta, which operates the local hospital. She said: "I had a commitment for a $10-million allocation to the Wangaratta hospital that, if elected, I was going to announce the week after the election. You know that." (Mr Schutt nodded and appeared to say, "Yes".) Ms Mirabella then said: "That is $10 million that Wangaratta hasn't had because Cathy got elected."

This is stunningly arrogant and remarkably gormless. Ms Mirabella's comments might be infected with rivalry and spite, but they also raise serious questions about how funding allocations are determined by governments and exactly what behaviour Ms Mirabella considers acceptable. Let's break it down.

Firstly, we find it strange that any political candidate would wait until a week after voters had made their decision before announcing they had secured from their party a multimillion-dollar commitment for a much-needed expansion of a busy hospital. Why keep it secret?

Promises such as these are traditionally deployed before an election to garner voter support. It's called pork-barrelling, a term that has become so hackneyed that its use almost normalises the objectionable and craven bargains it depicts.

In this case, a sitting candidate, whose party has promised funds for good deeds in her constituency, loses her seat. By her account, her party – on winning office with a thumping majority – backed away from it. Why would that be?

We suggest it has nothing to do with Ms McGowan being a first-timer MP and an independent, as Ms Mirabella contends. Nor does it have anything to do with Ms Mirabella's networks, contacts and knowledge; the money, by her version, would have been forthcoming from the Coalition if she had won.

No, this smacks of filthy payback by the Coalition. The funding was denied to the people of Wangaratta because the triumphant Abbott government was spited that a longstanding Liberal MP was dumped…..

Manus Island detention Centre declared illegal by PNG Supreme Court in a unanimous judgment

Five judges sitting as the Supreme Court of Justice in Papua New Guinea have unanimously ruled that holding 905 asylum seekers at Manus Island detention centre is unconstitutional and a violation of their human rights.

Excerpts from the full judgment:

The Turnbull Government refuses to consider returning these asyulm seekers to Australian mainland immigration detention centres.

Mr Dutton said refugees at Manus Island could resettle in PNG and those whose claims were rejected should return to their country of origin.

Earlier on Wednesday, Prime Minister Malcolm Turnbull said the court ruling was "under consideration" and the detention centre was the responsibility of the PNG government, adding "I can't provide a definitive road map from here".

The Australian Lawyers Alliance is of the opinion that this judgment opens the door for the Australian Government to be sued for damages by detainees.

PNG Supreme Court Decision on Manus Island by Stephanie Anderson

UPDATE

ABC News, 27 April 2016:

Papua New Guinea's Prime Minister Peter O'Neill says the Manus Island regional processing centre will be closed following a ruling from the country's Supreme Court….

Mr O'Neill has now released a statement said that his government "will immediately ask the Australian Government to make alternative arrangements for the asylum seekers".

"For those that have been deemed to be legitimate refugees, we invite them to live in Papua New Guinea only if they want to be a part of our society and make a contribution to our community," he said.

"It is clear that several of these refugees do not want to settle in Papua New Guinea and that is their decision."

Mr O'Neill has also stated that the local economy would suffer as a result and the Government would work with the Australian Government to ease the transition.

Australian Government asks Adelaide businessman to show the money

A look at one rocky road to Anzac Day 2016………..

Meet Chris Fox.

Campgallipoli.com.au:

Chris has a strong background in corporate finance and advisory services. He has advised on numerous business restructuring projects over the past 25 years including one of the country’s largest banks, health group organisations and logistics companies. In addition, he has substantial experience in marketing, media, advertising and event management at a National level. Chris was also the youngest Chairman of Anglicare, Australia’s largest non-for-profit organisation. Chris is the passionate leader behind the Camp Gallipoli concept and model.

Add to this sparse online biography, these past positions held by Chris Fox:

CHIEF EXECUTIVE OFFICER (CEO) Central Bayside Community Health Services Limited, Kingston, Victoria, 2012

Managing Director and Founder Fox Finance Group of Companies, April 1994 – November 2011 which included positions as:

MANAGING DIRECTOR of Fox Finance Corporation Pty Limited (merged in 2007 with National Merchant Bank). South Australian focussed, boutique Finance Company with over 3000 business clients.
CONSULTING to Chartered Accounting firm.
MANAGING DIRECTOR of Fox Partners Pty Limited (Management buy-out 2005) Integrated Financial Services Business.
EXECUTIVE CHAIRMAN of H Muecke & Co Pty Limited and Muecke Carrying Company Pty Limited (sold to P&O Ports Corp. United Kingdom in 2005)
Established in 1875, States oldest transport company.
EXECUTIVE CHAIRMAN of Cartonics (SA) Pty Limited (sold to National retailer Nextbyte in 2005)
Original Telco.

How the media reports the activities of Chris Fox.

News.com.au, 10 October 2014:

AT first flush it is a smart idea for thousands to share the essence of the iconic Gallipoli swag experience — a vigil under the stars, followed by a dawn service — much closer to home.

But to the man behind Camp Gallipoli it is much, much more — a chance for Australians to actively rediscover a positive national identity.

“Australia has lost its identity,” says founder Chris Fox. He adds: “We have gone backwards, we are everything we hated.”

Bandt.com.au, 19 February 2015:

Outdoor media provider APN Outdoor has thrown its support behind Camp Gallipoli, a not for profit organisation that is commemorating 100 years of ANZAC spirit with sleep out events to be held across Australia and New Zealand on April 24….

All Camp Gallipoli events will have spaces set aside for camping and there will be entertainment, guests, movies, documentaries and a special Dawn Service on Anzac day, so people can immerse themselves in the ANZAC legacy. All funds raised will go to Legacy and the Returned Services League (RSL).

A Camp Gallipoli event was held in Canberra on Saturday February 14 with a service at the Australian War Memorial. The RSL ANZAC Flame was passed on for it final journey to towns and cities representing the Camp Gallipoli Foundation.  The RSL ANZAC Flame travelled to Canberra last October, after it was lit in Albany, Western Australia, the city from where troops departed a century ago.

Chris Fox, chief executive, Camp Gallipoli Foundation said, “We recognise the uniqueness of the Australian and New Zealand spirit of unconditional mateship. We feel this was forged at Gallipoli in 1915 where race, background and status meant little and mateship, trust and honour meant everything. We are pleased to have corporate sponsors like APN Outdoor onboard to promote awareness of Camp Gallipoli across Australia and New Zealand.”

2GB Radio, 23 April 2015:

Steve Price is joined by Camp Gallipoli CEO Chris Fox to discuss how the cancelled Camp Gallipoli commemoration in Sydney is now back on.

The Australian, 10 November 215:

Tomorrow, students across Australia will donate a gold coin to restore a dilapidated school in the nearby village of Pozieres where almost 7000 Australians died during a six-week campaign in 1916 — the bloodiest battle in Australian history.

Historian Charles Bean described the site as “more densely sown with Australian sacrifice than any other spot on earth’’.

Camp Gallipoli Foundation chief executive Chris Fox said: “Billy Hughes once said that Australia was born on the shores of Gallipoli. Well, if that’s the case, then its baptism was Pozieres.”

The foundation is organising the fundraiser to provide a living memorial to the Anzac forces and encourage Australian children to learn about the great sacrifice the village represents, Mr Fox said.

The Sydney Morning Herald, 17 April 2016:

The chief executive of a charity responsible for controversial Anzac-branded merchandise that has been banned from sale has hit back at social media "snipers", saying the centenary commemorations of the Gallipoli landings are being "bogged down in negativity".   

In the face of the backlash over merchandising, Chris Fox, the chief executive of Camp Gallipoli, has defended his not-for-profit organisation as one that is educating young Australians about mateship and the legacy of Anzac Day at a series of camps.

Three Anzac branded items from a range developed by Camp Gallipoli have been pulled from shelves at Target after Minister for Veterans Affairs Michael Ronaldson deemed they had breached conditions of a permit the organisation has to sell the merchandise.

Mr Fox said all profits from the merchandise were being donated to the Returned Services League of Australia and Legacy.

The investigation is announced.

The Sydney Morning Herald, 23 April 2016:

An Anzac charity that received millions of dollars from government grants and ticketed events is now being investigated over fears it did not pass on the money raised to veterans associations.

The federal government has ordered an investigation into the Camp Gallipoli Foundation and has stripped it of its permit to use the protected word "Anzac" just days before the foundation stages a series of educational and fundraising events around the country on Anzac Day.

The move by the Department of Veterans Affairs comes after Fairfax Media revealed the foundation's chief executive, Chris Fox, may have personally profited from the foundation by charging "management fees" worth up to $1.5 million a year through commercial companies owned by his family and an associate.

The Camp Gallipoli Foundation, which last year received $2.5 million federal grant, has been unwilling to substantiate its claims that it donated money raised on behalf of veterans' charities despite collecting millions of dollars in ticketing revenue, donations and sponsorships from corporate Australia.

The national leadership of the RSL and Legacy report they have received no financial donations from Camp Gallipoli.

The revelations raise questions about how taxpayers funds were spent on the 2015 Anzac commemorations and the regulation of groups that fund raise on behalf of charities…..

The government did not comment on whether it was aware Mr Fox was a bankrupt as recently as 2013 when it issued the grant and official permission to use "Anzac" for the foundation's activities.

The Camp Gallipoli Foundation ran nationwide events on the eve of the Anzac centenary in 2015, hosting an estimated 40,000 people who paid up to $120 each to camp out "just like the Diggers did".

Events are also scheduled for most capital cities this Anzac Day.

The Department of Veterans' Affairs – through the Anzac Centenary Fund – backed the original program with a one-off grant of $2.5 million.

Another $1 million was contributed by corporate partners such as Target and Woolworths through merchandising deals and sponsorship arrangements.

Promotional materials said any surplus generated by the events – and its membership-based "Camp Gallipoli Club" – would be donated to veterans' groups, Legacy and the RSL.

In the days before the 2015 centenary events, Mr Fox announced Camp Gallipoli was expecting to generate a "surplus" of $900,000. Fairfax Media understands that severe weather at the Sydney event did hurt the finances of the foundation but it is unknown to what extent.

A dispute has erupted between Camp Gallipoli and the veterans' charities about the funds.

"Legacy has not received any money from Camp Gallipoli," national chairman Tony Ralph said.

RSL national chief Samantha Jackman said the organisation had also not received any donation after the 2015 events.

Both veterans' groups say they have no official relationship with Camp Gallipoli for 2016.

But the foundation's deputy chair Graham Ingerson maintains the foundation has "significantly supported" the RSL and Legacy. "The Foundation has invested significantly in many projects to aid and assist these charities."

Despite committing to release a list of these contributions, none was provided by the foundation.

A Fairfax Media investigation has also found that chief executive Chris Fox is apparently trying to turn the event into a commercial venture by charging percentage-based "management fees" through companies owned by his family and an associate.

The companies are entitled to receive fees equivalent to up to 20 per cent of the fixed cost of staging the events.

Mr Fox, who is also employed on a $150,000 annual salary as the CEO, has refused to disclose how much money the for-profit companies have actually made via Camp Gallipoli.

While eventually acknowledging they qualified for a fee worth up to $1.5 million in 2015, Mr Fox said no management fees have been charged because the Camp Gallipoli events did not generate enough revenue.

He later said his company did receive a payment of $100,000 to cover staff costs, as well as received "loans" from the foundation and a $215,000 gift from an unnamed benefactor to cover expenses in lieu of the fee payments. 

Mr Fox, who said he also had not received a salary in six months, eventually claimed he "did not know" what had been received by the companies in fees.

"We're living on scraps, metaphorically. We've run it on an oily rag. No one is trying to profit from it – we're just honestly trying to do something good," he said…..

Camp Gallipoli says Mr Fox's bankruptcy is "historic and finalised" and "unrelated to the work of the foundation".

Australian Federal Election 2016: Tony Abbott sings the 'I did it my way but I'll mend my ways' song again

Remember the promise to be “more consultative” after an “injudicious” knighting of Prince Phillip? Recall the promise of no more captain’s picks and to run a more "collegiate" party room in future?  What about the promise after the first “chastening” Libspill  that “good government starts today”?

Former prime minister and MP for Warringah Tony Abbott has been admitting his mistakes and promising to do better – over and over and over again – and now he’s doing it once more and still expecting to be believed.

His latest siren song has silly lyrics and he is singing off key.

The Australian, 23 April 2016:

A contrite Tony Abbott, in a unique exercise in self-criticism, has conceded a long list of mistake­s and misjudgments in relation­ to policy, public opinion and dealings with colleagues that were instrumental in costing him the prime ministership.

Mr Abbott’s admissions constitute­ a deep personal reassessment. He pledges to try to rectify­ in his future public life the lessons from his inadequacies as prime minister.

He concedes that the Abbott government failed to rise to the challenges of “greater fairness, more thoroughgoing justice and deeper empowerment”.

The litany of admitted failures, large and small, has no parallel as a public confession for a deposed prime minister, even though most are made in hindsight. Mr Abbott says: “I made some unnecessary enemies and left too many friends feeling under-appreciated.

“I can’t let pride in what was achieved under my leadership blind me to the flaws that made its termination easier, even if claims were exaggerated or exploited in self-serving ways.”

He concedes “there were some issues the Abbott government could have managed better or not pursued at all”.

Mr Abbott’s comments are made in an article, obtained by The Weekend Australian, to be published in the May issue of Quadrant magazine. It is the third and last in a series reviewing his government….

Signalling a willingness to remain in public life, Mr Abbott says that he hopes to address his failures “in my future public life”….

Human Rights Commission President Gillian Triggs on the ignorance, guile and bully boy tactics of Australian politicians

Excepts from an interview with President of the Australian Human Rights Commission, Professor Gillian Triggs, in The Saturday Paper on 23 April 2016:

Ramona Koval Did you think it was going to be this hard when you started at the commission? 

Gillian Triggs [laughs] No! I had absolutely no idea. I rather naively thought if you’d been dean of a law faculty you could manage anything. I was unprepared for dealing with senior political figures with no education whatsoever about international law and about Australia’s remarkable historical record which they are now diminishing. We’ve got senior public servants who will roll their eyes at the idea of a human right. They say, “Look, Gillian, you’re beating a dead horse.” It’s not going to work, because they can’t talk to the minister in terms of human rights. We’ve had, in my view, very poor leadership on this issue for the past 10 to 15 years, from the “children overboard” lie. They’ve been prepared to misstate the facts and conflate asylum-seeker issues with global terrorism. What I’m saying applies equally to Labor and Liberal and National parties. They’ve used this in bad faith to promote their own political opportunistic positions…..

RK You’ve said, “When I was younger I thought one could build on the past. But I have learned that we need to be eternally vigilant in ensuring human rights in a modern democracy.” Is that a sense of an idea of conservatism, building on the past, not letting go of good things that have been achieved? And feeling that confidence in that idea has been shaken?

GT A shocking phenomenon is Australians don’t even understand their own democratic system. They are quite content to have parliament be complicit with passing legislation to strengthen the powers of the executive and to exclude the courts. They have no idea of the separation of powers and the excessive overreach of executive government. 

RK Sisyphus comes to mind.

GT Well, it’s quite true. One can be astonished at the very simplistic level at which I need to speak. Our parliamentarians are usually seriously ill-informed and uneducated. All they know is the world of Canberra and politics and they’ve lost any sense of a rule of law, and curiously enough for Canberra they don’t even understand what democracy is. Not an easy argument to make, as you can imagine: me telling a parliamentarian they need to be better educated. [laughs] But it’s true.

RK Have you done that?

GT Oh, I have. And I have to say that some parliamentarians, and surprising ones, a Nationals MP, says “Come and give us a seminar.” Another one asked me to come up and work in parliament with the members of a particular committee that she was on. Terrific! But they listened to me and do you know, the response of some of them was, “Well, we had no idea Australia had signed up to these treaties. We should withdraw from them!” So backward steps! You still hear people say we must withdraw from the Refugee Convention or we must withdraw from the International Covenant on Civil and Political Rights……

RK I was astonished listening to him – how could the chair of the committee say he hadn’t read the report with such pride? 

GT I know. So I could have reacted very angrily to that and I am quite articulate and I can be very strong if I need to be: I could have used those skills, but I determinedly did not. It’s an environment in which I must be respectful, so frankly I thought as a lawyer I’d lose my case if I did [react angrily]. There was a point when I thought, “I’ve had 50 years as a reasonably respectable and quite conservative lawyer, how on earth do I find myself in this situation?” [laughs] But in the end I just had to get through the moment. But there were some lovely little side things, like the public servants behind the scenes, coming around with bowls of Jelly Snakes and Jelly Babies and mini Mars bars. Because we’d had nothing to eat, and they wouldn’t get us any food. The senators and members of the committee were all going off and having lunch. We’d had no breakfast, no morning tea and no lunch and I thought I’d faint, but these wonderful people were coming in and we were grabbing the food and eating it and they were saying [sotto voce], “You do realise that we are not responsible for this, don’t you?”, because some might think the secretariat had fed them these questions. 

RK But it was all the senators’ own work? 

GT With the attorney-general sitting next to me and encouraging it. And he was writing the questions which would be taken by his staff up to one of the senators, so feeding them the questions – an extraordinary experience. People were hugely supportive afterwards. Flowers were coming in. Each one brought a cheer from the staff and eventually it was so full that I couldn’t get in the room anymore. It was almost as though I had died the week before, and I’m thinking I must have missed something because I’m still standing here…….

RK The extent of the hostility and the personal nature of the attacks must have shocked you. 

GT To use those terrible words that the prime minister and especially the attorney-general used: “We have no confidence in Gillian Triggs.” The words reverberated around my head for a very long time. It was a very cruel and unjustified comment and the attempt to get me to resign for another position was a disgraceful thing to do, but it was exposed by the questions in senate. I could have had other options, the possibility of criminal prosecutions of the attorney. 

RK I wondered why you decided against pursuing that avenue? 

GT The AFP did consider it. They dealt with it extremely professionally. They were courteous but I made the decision that the greatest recognition of this wrongdoing was in the senate itself, when the senate censured the attorney for the first time in about 80 years and I felt that this issue was much more political than it was legal. I also wanted to move on, and I think that this underlies a lot of cases that don’t proceed…… 

RK I see that you have not let the 2015 experience cower you. You have made many comments on matters that you have proper concerns in – from marriage equality and Safe Schools programs to calling for monitoring of conditions for asylum seekers and refugees in offshore detention centres to concerns about counterterrorism laws. It looks like, if the government thought they could bully you into submission, they made rather the wrong call.

GT I’ve just turned 70 and I’ve been doing this for a long time and I’m so confident about the law and about the evidence for the law not being respected that I feel very sure-footed in going forward on these other issues. My resilience and determination and experience for a long time in the law give me the determination to get through the remaining 15 months to continue to speak out. When you see that you are being bullied by people who you know are not coming from a good place, you know you don’t have to give in to them. They are cowards and the moment you stand up to them they crumble, and they did crumble. And several now have been seen off long before me. They’re not used to a woman aged 70 standing up to them. They can’t quite believe it. If I were 40 looking for a career opportunity, I probably wouldn’t do what I’ve done because it would have queered the pitch for me professionally. But why do I care now? I can do what I’m trained to do and they almost can’t touch me. And I’ll continue to do that work when I’ve finished with this position.

Read the full article here. 

Something you may have missed in this month's news cycle

Before he entered federal parliament in 2004 Australian Prime Minister Malcolm Bligh Turnbull was Chairman and Managing Director of Goldman Sachs Australia from 1997 to 2001 and a Partner in Goldman Sachs and Co from 1998 to 2001.

In 2009 it was reported that Goldman Sachs made a confidential settlement on his behalf in the matter of the HIH collapse.

To this day he still invests with Goldman Sachs and, this month that investment bank paid US$5.06 billion in civil penalties for serious misconduct which contributed to the Global Financial Crisis (GFC) of 2008. 

Department of Justice

Office of Public Affairs

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FOR IMMEDIATE RELEASE

Monday, April 11, 2016

Goldman Sachs Agrees to Pay More than $5 Billion in Connection with Its Sale of Residential Mortgage Backed Securities

The Justice Department, along with federal and state partners, announced today a $5.06 billion settlement with Goldman Sachs related to Goldman’s conduct in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.  The resolution announced today requires Goldman to pay $2.385 billion in a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and also requires the bank to provide $1.8 billion in other relief, including relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing.  Goldman will also pay $875 million to resolve claims by other federal entities and state claims.  Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Goldman between 2005 and 2007. 

“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” said Acting Associate Attorney General Stuart F. Delery.  “This $5 billion settlement includes a $1.8 billion commitment to help repair the damage to homeowners and communities that Goldman acknowledges resulted from its conduct, and it makes clear that no institution may inflict this type of harm on investors and the American public without serious consequences.” 

“Today’s settlement is another example of the department’s resolve to hold accountable those whose illegal conduct resulted in the financial crisis of 2008,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Viewed in conjunction with the previous multibillion-dollar recoveries that the department has obtained for similar conduct, this settlement demonstrates the pervasiveness of the banking industry’s fraudulent practices in selling RMBS, and the power of the Financial Institutions Reform, Recovery and Enforcement Act as a tool for combatting this type of wrongdoing.”

“Today’s settlement is yet another acknowledgment by one of our leading financial institutions that it did not live up to the representations it made to investors about the products it was selling,” said U.S. Attorney Benjamin B. Wagner of the Eastern District of California.  “Goldman’s conduct in exploiting the RMBS market contributed to an international financial crisis that people across the country, including many in the Eastern District of California, continue to struggle to recover from.  I am gratified that this office has developed investigations, first against JPMorgan Chase and now against Goldman Sachs, that have led to significant civil settlements that hold bad actors in this market accountable.  The results obtained by this office and other members of the RMBS Working Group continue to send a message to Wall Street that we remain committed to pursuing those responsible for the financial crisis.”

The $2.385 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud.  The settlement expressly preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability.  In addition, as part of the settlement, Goldman agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Of the $875 million Goldman has agreed to pay to settle claims by various other federal and state entities: Goldman will pay $575 million to settle claims by the National Credit Union Administration, $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle, $37.5 million to settle claims by the Federal Home Loan Bank of Chicago, $190 million to settle claims by the state of New York, $25 million to settle claims by the state of Illinois and $10 million to settle claims by the state of California.

Goldman will pay out the remaining $1.8 billion in the form of relief to aid consumers harmed by its unlawful conduct.  $1.52 billion of that relief will be paid out pursuant to an agreement with the United States that Goldman will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country, as well as financing for affordable rental and for-sale housing throughout the country.  This agreement represents the largest commitment in any RMBS agreement to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.  $280 million will be paid out by Goldman pursuant to an agreement separately negotiated with the state of New York.

The settlement includes a statement of facts to which Goldman has agreed.  That statement of facts describes how Goldman made false and misleading representations to prospective investors about the characteristics of the loans it securitized and the ways in which Goldman would protect investors in its RMBS from harm (the quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted):

• Goldman told investors in offering documents that “[l]oans in the securitized pools were originated generally in accordance with the loan originator’s underwriting guidelines,” other than possible situations where “when the originator identified ‘compensating factors’ at the time of origination.”  But Goldman has today acknowledged that, “Goldman received information indicating that, for certain loan pools, significant percentages of the loans reviewed did not conform to the representations made to investors about the pools of loans to be securitized.”
• Specifically, Goldman has now acknowledged that, even when the results of its due diligence on samples of loans from those pools “indicated that the unsampled portions of the pools likely contained additional loans with credit exceptions, Goldman typically did not . . . identify and eliminate any additional loans with credit exceptions.”  Goldman has acknowledged that it “failed to do this even when the samples included significant numbers of loans with credit exceptions.” 
• Goldman’s Mortgage Capital Committee, which included senior mortgage department personnel and employees from Goldman’s credit and legal departments, was required to approve every RMBS issued by Goldman.  Goldman has now acknowledged that “[t]he Mortgage Capital Committee typically received . . . summaries of Goldman’s due diligence results for certain of the loan pools backing the securitization,” but that “[d]espite the high numbers of loans that Goldman had dropped from the loan pools, the Mortgage Capital Committee approved every RMBS that was presented to it between December 2005 and 2007.”  As one example, in early 2007, Goldman approved and issued a subprime RMBS backed by loans originated by New Century Mortgage Corporation, after Goldman’s due diligence process found that one of the loan pools to be securitized included loans originated with “[e]xtremely aggressive underwriting,” and where Goldman dropped 25 percent of the loans from the due diligence sample on that pool without reviewing the unsampled 70 percent of the pool to determine whether those loans had similar problems.
• Goldman has acknowledged that, for one August 2006 RMBS, the due diligence results for some of the loan pools resulted in an “unusually high” percentage of loans with credit and compliance defects.  The Mortgage Capital Committee was presented with a summary of these results and asked “How do we know that we caught everything?”  One transaction manager responded “we don’t.”  Another transaction manager responded, “Depends on what you mean by everything?  Because of the limited sampling . . . we don’t catch everything . . .”  Goldman has now acknowledged that the Mortgage Capital Committee approved this RMBS for securitization without requiring any further due diligence.   
• Goldman made detailed representations to investors about its “counterparty qualification process” for vetting loan originators, and told investors and one rating agency that Goldman would engage in ongoing monitoring of loan sellers.  Goldman has now acknowledged, however, that it “received certain negative information regarding the originators’ business practices” and that much of this information was not disclosed to investors. 
• For example, Goldman has now acknowledged that in late 2006 it conducted an internal analysis of the underwriting guidelines of Fremont Investment & Loan (an originator), which found many of Fremont’s guidelines to be “off market” or “at the aggressive end of market standards.”  Instead of disclosing its view of Fremont’s underwriting, Goldman has acknowledged that it “[u]ndertook a significant marketing effort” to tell investors about what Goldman called Fremont’s “commitment to loan quality over volume” and “significant enhancements to Fremont underwriting guidelines.”  Fremont was shut down by federal regulators within several months of these statements.
• In another example, Goldman was aware in early-mid 2006 of certain issues with Countrywide Financial Corporation’s origination process, including a pattern of non-responsiveness and inability to provide sufficient staff to handle the numerous loan pools Countrywide was selling.  In April 2006, while Goldman was preparing an RMBS backed by Countrywide loans for securitization, a Goldman mortgage department manager circulated a “very bullish” equity research report that recommended the purchase of Countrywide stock.  Goldman’s head of due diligence, who had just overseen the due diligence on six Countrywide pools, responded “If they only knew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .”
• Meanwhile, as Goldman has acknowledged in this statement of facts, “[Around the end of 2006], Goldman employees observed signs of uncertainty in the residential mortgage market [and] by March 2007, Goldman had largely halted new purchases of subprime loan pools.”  

Assistant U.S. Attorneys Colleen Kennedy and Kelli Taylor of the Eastern District of California investigated Goldman’s conduct in connection with RMBS, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG) and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

“Goldman Sachs had a fiduciary responsibility to investors, which they blatantly side stepped,” said Deputy Inspector General for Investigation Rene Febles of FHFA-OIG.  “They knowingly put investors at risk and in so doing contributed significantly to the financial crisis.  The losses caused by this irresponsible behavior deeply affected not only financial institutions but also taxpayers and one can only hope that Goldman Sachs has learned the difference between risk and deceit.  Two Federal Home Loan Banks suffered significant losses so we are pleased to see both entities receive a portion of this settlement.  We will continue to work with our law enforcement partners to hold those accountable who have engaged in misconduct.”

“Goldman took $10 billion in TARP bailout funds knowing that it had fraudulently misrepresented to investors the quality of residential mortgages bundled into mortgage backed securities,” said Special Inspector General Christy Goldsmith Romero for TARP.  “Many of these toxic securities were traded in a taxpayer funded bailout program that was designed to unlock frozen credit markets during the crisis.  While crisis investigations take time, SIGTARP is committed to working with our law enforcement partners to protect taxpayers and bring accountability and justice.”

The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis.  The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country.  The RMBS Working Group is led by Director Joshua Wilkenfeld and five co-chairs: Principal Deputy Assistant Attorney General Mizer, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, U.S. Attorney John Walsh of the District of Colorado and New York Attorney General Eric Schneiderman.  This settlement is the fifth multibillion-dollar RMBS settlement announced by the working group.

Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at www.StopFraud.gov.