China Accuses Goldman Sachs of "Evil Intentions"

April 28, 2010 (LPAC)—Goldman Sachs, despite extremely close relations with China and several of China's top leaders, has been denounced for selling derivatives to government-backed companies which threatened to cost the companies billions of dollars in losses — except, the government has refused to pay.

Late last year, China's State Assets Supervision and Administration Commission (SASAC) intervened on behalf of several Chinese companies in legal actions against foreign banks (mostly Goldman) on derivatives deals. For example, Goldman, through a subsidiary J. Aron, sold derivatives to the Shenzhen Nanshan Power company at the peak of the oil price fluctuations, leaving the company with $80 million in losses when the price of fuel fell sharply.

Li Wei, SASAC vice president, claimed that the companies lost $1.7 billion on $18 billion worth of derivative contracts, and that the losses were "closely associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions."

The Telegraph says that Goldman declines to comment, but that the issue is still active.