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The Goldman Sachs Group, Inc. (GS - Analyst Report) 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.

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. (BOFI - Snapshot Report), Preferred Bank (PFBC - Snapshot Report) and TriCo Bancshares (TCBK - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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