Jaohn Paulson Goes Into Damage Control

As reported by the Wall Street Journal, John Paulson has spent some time with some of his clients reassuring them that his part in Goldman's synthetic CDOs at the heart of the SEC civil-fraud charge was above-board. He also indicated that his firms deals in high-volume stocks that can be gotten rid of without gutting their price.

Investors have indicated they are concerned that scrutiny over the firm's deals may spread, including to overseas regulators. They said they wanted to protect themselves in case new information emerges that could damage the hedge fund, they say. Another issue, they say: The legal case could simply prove a distraction for Mr. Paulson.

"Some of the callers asked pointed questions, almost like a court inquisition, but most people were supportive," said Brad Alford, who runs Alpha Capital Management. "I felt reassured that he did nothing wrong."

"It's not a rush for the doors," said another investor in Paulson & Co. who has communicated with larger Paulson investors since Friday, when the government unveiled its Goldman case.

Actually, it looks like Paulson has put out the fire.