Fraud allegations cause Goldman Sachs scores to fall

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Mon, 26/04/2010 - 15:25

Goldman Sachs has seen its US BrandIndex 'Reputation' and 'Buzz' scores tumble following the recent allegations of fraud by the US regulator, the Securities and Exchange Commission (SEC). These accusations, first reported earlier this month, coincide with a severe slide in Goldman Sachs' reputation score. Although scores have been consistently negative, they have fallen to the lowest score the firm has ever experienced on the system. Negative sentiment doubled from -15 to -30 in a single fortnight.

The investment banking giant has been accused of defrauding investors out of $1billion in a deal with one of the world's largest hedge funds, Paulson & Co. The hedge fund allegedly chose risky loans to be repackaged by Goldman Sachs, whilst simultaneously betting on them to fail.

The SEC has accused Goldman Sachs of not divulging information on the riskiness of the mortgage portfolio to its investors. As a result, the firm is now being scrutinised on both sides of the Atlantic, as the Financial Services Authority (FSA) has launched an investigation of the UK-regulated branches of Goldman Sachs. The firm has furiously defended its innocence and has even written a 60-page long response document to this end.

But its protestations have done little to tame the scandalous press coverage surrounding the issue, which in turn has seen a similar nose-dive in the firm's BrandIndex 'Buzz' score. A 'Buzz' score provides a quantitative measure of opinion by asking respondents if they have heard anything negative or positive about a given brand, and subtracting negative comments from positive ones. This gives a net score. As seen in the graph below, Goldman Sachs' 'Buzz' score has crashed since the allegations were brought to light, slipping to -31.5 late last week.

Despite vouching for its employees in the centre of the controversy, in recent days Goldman Sachs has announced that it has de-registered its London executive, Fabrice Tourre, which prevents him from performing any registered trading work. With moves such as this fuelling the public's perception of the firm's guilt, BrandIndex 'Buzz' and 'Reputation' scores are surely set to plummet even further.

Goldman Sachs 'Buzz' and 'Reputation' scores
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