Illegal Practices in Inside Job, a Movie by Charles Ferguson

The movie Inside Job, which addresses the main causes of the financial. And subprime mortgage crises in 2008, gives several examples of potentially. Illegal practices executed by major investment companies in the years preceding the crash. Although these companies benefitted in the short term from their potentially fraudulent activities. Many of these top investment banks have received and could possibly receive more serious legal discipline for their poor actions.

In the film, there is a lot of questionable activity including Goldman Sachs and their tactics with investors. As reported, the company promoted and sold collateralized debt obligations (CDO's) to investors. While also betting for these exact CDO's to fail with credit default swaps that they were buying from AIG Inc. at the same time. Goldman Sachs' activity got even more suspicious in 2007. When they began to sell CDO's that were designed to bring in more profits as their customers lost more money. The government even found company e-mails between Goldman Sachs employees describing certain investments as bad deals. And then continuing to tell their employees in later e-mails to promote those same investments.

This practice can be classified under fraud in the inducement. Which is a false representation of a material fact that is made with the knowledge of it being false. And the intention to deceive the other party, ultimately leading the other party to enter into the contract. All agreements where fraud in the inducement is prevalent render the contracts voidable.

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When applying this rule of law to the scenario with Goldman Sachs, it is likely that the investors who fell victims could win in a court of law if they could prove that they had relied heavily on Goldman Sachs' misrepresentations when making their investments. When looking at the facts, there is no doubt that a number of the company's investment bankers were falsely representing a number of different investments as high quality when they were nothing of the sort in order to spark an interest in investors.

According to the reports, these investment bankers were also well aware of the falsity of these statements and had every intention to deceive investors. While the first four requisites of fraud in the inducement are undeniably present thanks in part to irresponsible company e-mails, whether each investor justifiably relied on Goldman Sachs employees' false information or whether they had a previous interest in these bad deals will determine who wins each case. If an investor did in fact justifiably rely on the false statements of a Goldman Sachs banker when deciding to make the investment and later decided to sue Goldman Sachs for damages, it seems highly likely that the contract would be rendered voidable and the victim could potentially receive damages as well.

Deceiving customers into investing in poor quality deals in order to rake in a lot more money may have sounded like a good idea to Goldman Sachs and many of their investment bankers. However, they've had to and undoubtedly will have to deal with several more legal disputes with unhappy investors because of it, many of which they will most likely lose in.

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