* Goldman brings on Boies Schiller for CDO case
* Goldman's outside legal team keeps expanding
* Cost of fending off regulators keeps rising
By Matthew Goldstein and Steve Eder
NEW YORK, June 11 Goldman Sachs Group Inc's
(GS.N) mounting legal and regulatory woes stemming from the
firm's sale of subprime mortgage-linked securities are turning
into gold for a growing number of lawyers in New York and
The Wall Street investment firm tapped well known
litigation specialists Boies, Schiller & Flexner to defend a
lawsuit filed June 9 by an Australian hedge fund that seeks $1
billion in damages, said people familiar with the situation,
but who declined to be identified because they were not
authorized to speak on the matter.
David Boies, the New York-based firm's co-founder and
chairman, is best known for overseeing the U.S. Department of
Justice's antitrust case against Microsoft Corp (MSFT.O) and
directing former Vice President Al Gore's Florida recount in
the 2000 presidential election.
Boies Schiller will join with lawyers from Sullivan &
Cromwell, Skadden Arps, Gibson Dunn & Crutcher and O'Melveny &
Myers, all of whom have had a hand in advising Goldman on
either a civil fraud lawsuit filed by the U.S. Securities and
Exchange Commission or on dealings with other federal
Goldman's rising legal tab is just one more example of
fallout from myriad investigations and lawsuits facing the
company as it fends off allegations from regulators, customers
and shareholders that it used deceptive sales practices to
market billions of dollars' worth of collateralized debt
To date, the regulatory scandal, which began with the
filing of the SEC lawsuit on April 16, has cost Goldman $25
billion in market capitalization.
Goldman, which does not break out a specific line item for
outside legal expenses in its quarterly financial reports,
declined to comment on its legal defense strategy. It disclosed
at its annual shareholder meeting that it paid $293 million in
2009 for outside legal expenses.
Jonathan Schiller, Boies Schiller's co-founder, who has
represented Barclays Capital in the Lehman Brothers LEHMQ.PK
bankruptcy, will oversee Goldman's defense to the lawsuit
brought by Basis Yield Alpha Fund, sources said. Schiller could
not be reached for comment.
Basis seeks to recoup the $56 million it lost on an
investment in a CDO called Timberwolf that liquidated in 2008
-- a little over a year after Goldman underwrote the $1 billion
deal. The now-defunct Basis fund, which contends Goldman
misrepresented the value of the Timberwolf securities, also
seeks $1 billion in punitive damages.
In the weeks leading up to the filing of the lawsuit,
negotiations between Goldman and the Australian hedge fund had
been led by Richard Klapper of Sullivan & Cromwell, people
familiar with the situation said. But once the lawsuit was
filed, Goldman decided to retain the Boies firm.
The Boies firm, sources said, may also work on other
CDO-related matters facing Goldman.
Klapper, who could not be reached for comment, has been
Goldman's lead outside lawyer in dealing with the SEC, which
filed a civil fraud lawsuit over another CDO, Abacus 2007, on
In the wake of the SEC lawsuit, Goldman has been signing up
other high-profile lawyers, some with deep political
connections in Washington.
One of the first people Goldman turned to was Gregory
Craig, a former White House counsel for President Barack Obama,
and now a partner in Skadden's Washington office. Working with
Craig is Skadden litigation partner Cliff Sloan, who served as
associate counsel to former President Bill Clinton and has also
represented the rock band Bon Jovi in a copyright infringement
lawsuit, sources said.
Craig declined to comment on Skadden's legal work for
Goldman, though, started building its outside legal team
long before it was charged by the SEC on April 16.
For more than a year, the firm was the subject of a probe
by the U.S. Senate Permanent Subcommittee on Investigations, a
examination that concluded with a Capitol Hill hearing on April
Two former subcommittee staffers -- K Lee Blalack, a
partner with O'Melveny & Myers, and Michael Bopp, a partner
with Gibson Dunn -- helped prepare Goldman Chief Executive
Officer Lloyd Blankfein and other current and former executives
for the widely publicized hearing.
(Reporting by Matthew Goldstein and Steve Eder. Editing by