Goldman Sachs Group, Inc. (NYSE:GS) won a case concerning fraud allegations, which were put over it by the bond insurer associated with a CDO related to subprime mortgage securities called Abacus.
Goldman Sachs Group, Inc. (GS) Case & Judgment
The New York state appeals court dismissed an allegation by ACA Financial Guaranty Corp, which said that Goldman Sachs Group, Inc. (NYSE:GS) suggested the company to insure the CDO or collateralized debt obligation.
In its decision, Appellate Division, First Department in Manhattan said that ACA is a “highly sophisticated commercial entity” who could not produce the disclosure and other evidence, which prove their claim that they were fraudulently induced.
ACA financial accused Goldman that it committed fraud by making them believe that Paulson & Co, which is a hedge fund, was playing long in the Abacus CDO. However, Goldman already knew that Paulson will play short position.
The court said that it was up to ACA to enquire with the Paulson & Co that whether they will go long or short and what is their intention.
Goldman Sachs Group, Inc. (NYSE:GS) has settled a claim with the U.S. Securities and Exchange Commission (SEC) for $550 million. It was accused of misleading the investors in Abacus, in 2010. However, Goldman at that time did not accept that it has misled the investors.
Responses from both the parties
Marc Kasowitz attorney representing ACA Financials said that the firm will appeal against the decision of the court and may also request the appellate panel to reconsider the case.
“We are pleased with the court’s decision to dismiss ACA’s claim against Goldman Sachs,” said Tiffany Galvin, a spokeswoman for Goldman. She declined further comment.
Case against Paulson
The attorney further said that there is a “live” amended complaint, which was filed in January, and on it the name is Paulson & Co as a defendant in the case.
According to the complaint, Goldman Sachs Group, Inc. (NYSE:GS) was the culprit of deceitful inducement and covering it up fraudulently. The court has dismissed both the causes of action.
ACA filed complaints against Paulson as well for fraud similar to that of Goldman and claimed that Paulson helped and supported the fraud. An appeal to dismiss the case by Paulson is pending. There was no response from the spokesperson of the company.
Case Pending
The case of Goldman Sachs Group, Inc. (NYSE:GS) has been settled, but that of Vice president Fabrice Tourre is pending in which he is accused of not telling the investors to choose and bet against the mortgage security in Abacus.
