Bond insurer ACA Financial Guaranty Corp. has filed fraud suit against Goldman Sachs for its role in creating and marketing a CDO called Abacus, according to Liz Moyer’s WSJ article, “ACA Sues Goldman Over Abacus.” ACA bought millions of dollars of the CDO and insured super-senior tranches for $909 million, according to the article. ACA is reportedly seeking $30 million in compensatory damages and $90 million is punitive damages.
Last July, Goldman paid $550 million to settle SEC charges that it misled its clients in the sale of Abacus ? at the time, the largest SEC settlement ever. As both the SEC and ACA allege, Goldman secretly designed Abacus to fail so that a hedge fund client, Paulson & Co., could profit by shorting the deal (Goldman even allowed Paulson to select the underlying investments) and Goldman could rake in fat banking fees. According to ACA, Abacus “was worthless” at the time of sale, and ACA had been led to believe that Paulson was taking a long position in Abacus. “Had Paulson’s true role as a short investor selecting the portfolio been known, neither ACA nor anyone else would have taken a long position in it,” an ACA spokesman was quoted as saying.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing institutional and individual investors in securities-related litigation and arbitration all over the country. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 40 occasions.