SAN FRANCISCO--(BUSINESS WIRE)--The founders of Marvell Technology Group (Nasdaq: MRVL), Sehat Sutardja and Weili Dai, filed a lawsuit in San Francisco Superior Court against Goldman Sachs (NYSE: GS) and two account executives, alleging Goldman Sachs manipulated the 2008 financial crisis to defraud the two Silicon Valley executives of more than $100 million.
Mr. Sutardja and Ms. Dai founded Marvell Technology Group, a worldwide semiconductor company in Santa Clara in 1995. Goldman Sachs managed the IPO for Marvell and put the two executives into their Private Wealth Management Group. It is alleged that once the two executives’ personal wealth was under the financial management of Goldman Sachs, the firm abused the two executives’ trust, manipulated their relationship, and ultimately defrauded them of more than $100 million.
The suit alleges Goldman Sachs issued a margin call for the two executives’ investment accounts, which were managed by Goldman Sachs Private Wealth Management Group, under false pretenses, wrongly claiming an SEC Rule mandated the margin call when no such rule existed. It is alleged the margin call was a result of Goldman Sachs’ need to repair its balance sheet and insulate itself from the extreme market turmoil of the financial crisis in 2008. Further, the complaint alleges that Goldman Sachs’ wholly improper margin call reflects the Goldman Sachs’ willingness to put its own interests ahead of its clients. The complaint alleges that:
“Through a series of extraordinary and deceitful acts, geared to save Goldman at all costs, the Firm used its clients’ accounts to leverage its success, making unreasonable collateral calls on its private wealth management clients. Despite receiving an investment of $10 billion as a participant in the United States Treasury’s TARP Capital Purchase Program, Goldman forced its clients to unnecessarily liquidate their holdings through forced margin calls, only to repurchase these same shareholdings for accounts owned by Goldman and its related hedge funds, some currently under investigation by the federal government. Goldman’s focus was to strengthen its balance sheet, no matter how many relationships were destroyed in the process. The consequences to Goldman clients, such as Plaintiffs, were disastrous. They became the victims of one of the largest acts of corporate greed and avarice in the history of our financial markets.” (Page 1, Sehat Sutardja and Weili Dai v. Goldman Sachs & Co., Inc.)
As alleged in the complaint, Plaintiffs were told by Goldman Sachs that orders for the margin call were issued from Goldman Sachs’ most senior executives. The complaint alleges the margin call was issued during the exact same time frame the now infamous Raj Rajaratman and other employees of the Galleon hedge fund were perpetrating mass insider trading using information obtained from Goldman Board members. According to the SEC investigation, Rajaratman received inside information from the highest levels of Goldman regarding Marvell in 2008—the same time Plaintiffs were improperly forced to sell their Marvell shares.
“In November 2008, Goldman contrived grounds to make a “margin call” on Plaintiffs’ accounts. Goldman insisted the pledged Marvell shares be sold immediately. Acting on behalf of Goldman, [Bradley] DeFoor [the account executive] justified the margin call with a lie, telling Dai and Sutardja there was an SEC rule that DeFoor called the “SEC Five Dollar Rule.” According to DeFoor, the “SEC Five Dollar Rule” required Plaintiffs to sell the Marvell shares in the margin account because the value of Marvell’s stock had dropped below $5 per share.
“There is no “SEC Five Dollar Rule.” No such SEC rule exists, a fact DeFoor and others at Goldman knew at the time they issued the margin call on behalf of Goldman, forcing Plaintiffs to sell their Marvell shares. Goldman maintained this lie for years. As recently as November, 2010, senior Goldman officials, John Weinberger and Tucker York, told Dai and Sutardja the “Five Dollar Rule” might be a “New York Stock Exchange” rule, not an SEC rule. No such New York Stock Exchange “Five Dollar Rule” exists.
“When DeFoor was questioned about the need to sell the Marvell shares, DeFoor stated instructions were from Goldman’s most senior executives.” (Page 4 and 5, Sehat Sutardja and Weili Dai v. Goldman Sachs & Co., Inc.)
The suit was filed by two San Francisco area law firms, KEKER & VAN NEST LLP and COTCHETT, PITRE & McCARTHY, LLP - signed by John Keker and Joseph Cotchett. The suit seeks return of millions of dollars and punitive damages.
FOR FULL COMPLAINT, SEE www.cpmlegal.com