Goldman Sachs, accused of defrauding investors by concealing Greece"s swap operations

Goldman Sachs, Wall Street"s most profitable investment bank, is being criticized by European politicians, for possibly aiding Greece in concealing its budget deficit and withholding information on Greece"s swap agreement.

The Goldman Sachs group helped Greece raise USD 1 billion in funding eight years ago through a swap agreement that the authorities of the EU say they were unaware of.

No mention was made of the swap in the sales documents for the bonds in the case of at least six out of the ten sales that the bank arranged for Greece since the transaction.

"Concealing the swap may have allowed Goldman, a co-lead manager on many of the sales, the other underwriters involved and Greece to get a better price for the securities", said Bill Blain, co-head of fixed income at Matrix Corporate Capital LLP, a London-based brokerage and fund manager.

"The price of bonds should reflect the reality of Greece"s finances," Blain said. "If a bank was selling them to investors on the basis of publicly available information, and they were aware that information was incorrect, then investors have been fooled."

The transaction with Goldman consisted of a cross-currency swap of about $10 billion of debt issued by Greece in dollars and yen.

The swaps used by Greece to manage debt were "at the time legal," Greek Finance Minister George Papaconstantinou said on Feb. 15, and added the Greek government isn"t using the swaps now.

Eurostat, the EU"s statistics office, this week ordered Greece to hand over information on the swaps transactions by the end of this week.