As JPMorgan Chase works its way through its own legal morass, it can look to Goldman Sachs for an example of how long litigation can haunt a bank.
Goldman is poised to leave behind a long-running lawsuit over the 1999 initial public offering of eToys, an online toy retailer whose rise and fall became a symbol of the dotcom boom and bust. A federal judge on Thursday approved a settlement of the matter, in which the investment bank will pay $7.5 million to eToys creditors.
Though many of the specters of the dotcom frenzy have dissipated â€" Kozmo.com and Pets.com among them â€" eToys has lingered in legal system, including in courts in New York and Delaware.
At issue is the company’s I.P.O., which Goldman priced at $20. Shares in eToys leaped well above that in their first day of trading, closing at $77. Critics of the process, including creditors, have argued that the Goldman-led offering enriched special clients of the firm at the expense of the retailer, which could have used the money to build much-needed infrastructure to keep up with demand.
In their lawsuit, plaintiffs pointed to internal documents suggesting that Goldman staffers gave investor clients access to hot I.P.O.’s in exchange for return business.
Goldman has denied any wrongdoing and told The New York Times’ Joe Nocera earlier this year that the documents do not back up claims of a quid pro quo arrangement with clients.
