NEW YORK -- Bolstered by unexpectedly strong earnings, executives at Goldman Sachs Group Inc. took in stride the government's fraud lawsuit against the firm as they downplayed the importance of allegations the company misled investors about some of the complex securities at the heart of the 2008 financial crisis.
In their first extended comments about the lawsuit, executives told industry analysts and investors in a conference call Tuesday that the company did nothing wrong in the case outlined Friday by the Securities and Exchange Commission.
"We would never intentionally mislead anyone, certainly not our clients," said Greg Palm, Goldman's chief legal counsel. "When you go to the core of the SEC complaint, it clearly revolves around a he-said-she-said a little bit."
David Viniar, the firm's chief financial officer, said matter-of-factly: "As long as we continue to perform for our clients, they will be happy with us. And if we stop performing for them, they won't."
After the call, a wide range of banking analysts gave Goldman's presentation a positive reading, recommending that clients buy the stock.
"I found it very reassuring that they took it in stride, that they seemed so calm," said Michael Wong, an analyst with research firm Morningstar Inc. "It seems like Goldman has mounted a pretty decent defense to the allegation."
For the first quarter, Goldman's profit soared more than 90 percent to $3.5 billion, or $5.59 a share, compared with $1.8 billion, or $3.39 a share, for the first three months last year. Wall Street analysts on average had expected net income of $4.14 a share, according to a survey by Bloomberg.
Quarterly revenue increased 36 percent to $12.8 billion.
As with other big banks this year, most of the revenue came from the trading of fixed-income instruments such as bonds, currencies and commodities. That trading accounted for 57 percent of the firm's entire revenue, and was boosted by the volatility in the markets and low government interest rates.
"You can see from our results last quarter that our clients still support us," Viniar said.
The New York investment banking house emerged from the financial crisis stronger than almost any other firm. But even before the SEC lawsuit was filed, the company was buffeted by public criticism over its huge bonuses and its marketing of complex financial instruments in the years before the credit crunch.
In response to public anger, executives decided at the end of last year to reduce the pool of money it set aside for compensation, leaving it with $16.2 billion, or an average of $498,000 for each employee.
But for the first three months this year, the compensation pool jumped up again, to $5.5 billion, which amounts to 43 percent of the company's total revenues. If that figure holds over the entire year, it would be enough to pay each of its employees $665,000.
Goldman's stock has been hit heavily since the SEC filed its lawsuit, dropping more than 10 percent. On Tuesday, shares fell $3.34, or 2 percent, to $159.98.
And earlier Tuesday, the British Financial Services Authority said it would begin a formal investigation of Goldman's activities there.
British Liberal Democrat leader Nick Clegg, saying the allegations against Goldman were "extraordinarily serious," recommended that the company be suspended from its role as a government advisor until "these allegations are properly looked into," according to British news reports.
The SEC accused Goldman of creating a collateralized debt obligation that was designed to fail and that ultimately led to $1 billion in losses for its customers.
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The new class of securities was formed at the request of a major hedge fund client, John Paulson, who wanted to bet against the security, the complaint alleged. The SEC said that Goldman misled investors who bought the securities, known as ABACUS 2007-AC1, by not explaining Paulson's role in its creation.
Goldman executives said the SEC had collected material from Goldman Sachs in the months before it brought the case, but Palm said the firm had no warning about the lawsuit.
"We were somewhat surprised on Friday morning that this was a filed case. No one had told us about it in advance," Palm said.
The company has mounted an ever-broadening defense of itself since then. It has emphasized that the investors that bought ABACUS were sophisticated enough to judge the quality of it. Palm also noted that Goldman bought some of the securities itself, and lost $100 million -- a figure that has been revised upward since Friday.
"We obviously thought there was nothing wrong with this portfolio, otherwise we wouldn't have done that," Palm said.
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Douglas Sipkin, a bank analyst at Ticonderoga Securities, said potential clients are unlikely to be scared off by the charges primarily because of how many other banks were doing similar things before the credit crunch.
"I don't think, when institutional investors look at this, that they will think Goldman was doing anything materially different than what other institutions were doing," Sipkin said.
As for possible fines or penalties, analyst Wong said, "No matter how big the fine, Goldman Sachs can likely absorb it."
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