Goldman’s CDO Problems Continue


A Manhattan federal judge has consolidated securities class actions against Goldman Sachs Group Inc. and other affiliated persons (Goldman) and appointed three pension funds as co-lead plaintiffs in a lawsuit relating to a collateral debt obligation called Abacus, according to a Reuters article entitled “Pension funds to lead suit vs. Goldman over Abacus.” The class actions brought by purchasers of Goldman stock allege that Goldman officers and directors made false and misleading statements concerning its sale of a collateralized debt obligation (CDO) known as Abacus 2007 AC-1 (Abacus).

Abacus, a CDO linked to subprime mortgages, was allegedly designed to benefit one client who wanted to short the CDO while Goldman would sell the CDO to other clients. Goldman allegedly failed to disclose that it had received a Wells notice from the SEC in July, 2009. The SEC sued Goldman on April 16, 2010 “for making material misleading statements and discussions in connection with” Abacus. Almost immediately, the price of Goldman stock fell sharply, and fell further when the Department of Justice announced that it was commencing a criminal investigation. These disclosures are said to have caused the price of Goldman stock to drop by 21% from $184.27 on April 15, 2010 to $145.20 on April 30, 2010.

The judge appointed the Arkansas Teachers Retirement System, the West Virginia Investment Management Board, and the Plumbers and Pipefitters National Pension Group in Alexandria, Virginia as the plaintiffs most capable of representing the interests of the class. These funds had the largest losses, according to the article.

Goldman agreed to pay $550 million to settle the SEC case last year.

The consolidated class action is In re: Goldman Sachs Group Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 10-03461.

Page Perry has 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.