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When does an investor who's "fooled" become an investor who's "defrauded?" We may soon find out. It would appear that Bloomberg Media's lawyers must've had a hand in the phrasing of this headline atop a breaking story, tonight: "Goldman Sachs, Greece Didn't Disclose Swap, Investors `Fooled'."

(Hmmm...."fooled." What does it state in Roget's when you lookup "fraud?" "Defrauded?" "Cheated?" "Scammed?")

Well, once you read the story, the bottom line is that if there's discovery, and source data (i.e.: "the smoking gun") reveals the parties were aware of the deception at the time it occurred, then it is documentation of fraud.

But, the story also tells us that, on Monday, Greek Finance Minister George Papaconstantinou now claims that this was all "legal" when it occurred?

When did defrauding investors become illegal? Yesterday?

You must be kidding me, right?

Tonight, Bloomberg tells us how Goldman Sachs Group, Inc. managed $15 billion in bond sales for the Greek government after the New York-based firm engaged in a currency swap in 2002 which enabled that sovereign state to hide the depth of its deficit(s).



Goldman Sachs, Greece Didn't Disclose Swap, Investors `Fooled'

Bloomber.com

By Elisa Martinuzzi Feb. 17 (Bloomberg) -- ...No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg. The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap, which European Union regulators said they knew nothing about until recent days. Failing to disclose the swap may have allowed Goldman, a co-lead manager on many of the sales, other underwriters 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 broker 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 article continues on to tell us that, according to Bloomberg's research, Goldman Sachs earned roughly one billion dollars underwriting Greek bonds since 2002. Reiterating: out of the 10 bond sales that Goldman either managed or co-managed that have occurred since then, prospectuses for six of them (the other four couldn't be sourced by Bloomberg) contained no mention of the 2002 swaps.

Matrix Corporate Capital's Blain is also quoted in the fairly lengthy article's closing paragraph stating what has become pretty obvious even to folks whose I.Q. might be lower than the outdoor temperature on Wall Street this month...



"Investment banks are guilty of being part of a wider collusion that fudged the numbers to make the euro look like a working currency union," said Matrix's Blain. "The bottom line is foreign exchange and bond investors bought something sellers knew not to be the case."



The Bloomberg article also tells us that the European Union's statistics office, Eurostat, has "...ordered Greece to hand over information on the swaps transactions by the end of this week in an investigation that may extend to other EU countries."

(As a noted in another diary over the past week, Spain is among the "other EU countries" rumored to be a participant in the investigation.)

Does anyone on the planet really think the formal discovery of a "smoking gun memo" is even necessary at this point? It may be a critical "formality," but it is really just that--a formality--now isn't it?

I mean, after all is said and done, that would mean that we'd have to take a closer look at Bush Treasury Secretary Hank Paulson's knowledge of the matter, since much of this occurred on his watch when he was CEO of Goldman Sachs.

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Here's some follow-up reading, complete with numerous other links (i.e.: NY Times, El Pais, etc.) on the matter, for those tracking this travesty:

"Germany: 'Goldman broke the spirit of Maastricht Treaty...'" (2/16/10)

"Johnson: Eurozone May Ban Goldman, Humiliate Fed (updated)" (2/15/10)

"First Greece; Now Spanish Intelligence Opens Wall St. Probe" (2/14/10)

"Does Wall Street Now Openly Control U.S. Foreign Policy, Too?" (2/9/10)