The Goldman Sachs Group, Inc.
) continues to be braced with legal woes. Recently, it has been
subject to the European Union (EU) anti-trust probe concerning
the bank's underwater power cables alliance with Prysmian S.p.A.
Depending on the results of the investigation, Goldman could be
slapped with a penalty early next year, according to Bloomberg.
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The EU accused Prysmian of undertaking action to hamper healthy
competition such as the rigging of prices between 1998 and 2008.
The EU claimed certain companies including ABB Ltd., Nexans SA
and NKT Holding A/S fixed the prices of undersea and underground
high-voltage power cables sold to energy providers in Europe for
at least 10 years.
In 2005, Goldman Sachs Capital Partners - the private equity arm
of Goldman - bought Italian cable maker, Prysmian. In 2007,
Prysmian held an initial public offering that resulted in a
reduced stake for Goldman in 2009. However, the regulators feel
that Goldman still holds enough stake in the Italian cable maker
to pay fines.
The regulatory body proclaimed that Goldman would be liable for
any fine levied on Prysmian. However, Goldman claimed that it was
not aware of Prysmian's role in rigging prices in share markets
when the bank's private equity arm bought the latter.
However, Goldman's argument has not been able to convince the EU,
as European regulators claimed that parent companies are
responsible for any lapse by their subsidiaries as the latter do
not take business decisions autonomously.
Litigation-related worries have been plaguing major global banks
for quite some time. If Goldman has to pay a fine in the
aforementioned matter, it will be a drag on its financials.
Goldman currently carries a Zacks Rank #3 (Hold). Better-ranked
banking stocks include
BofI Holding, Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).