Goldman Sachs has denied dismissal of lawsuit

Manhattan court denied Goldman Sachs The group’s appeal to dismiss a class action lawsuit that accuses the investment bank of withholding information when it created risky securities before the Great Recession, according to a report in Reuters.

In a 2-1 decision Tuesday (April 7), the 2nd U.S. Court of Appeals said Goldman had failed “to overcome a presumption that shareholders relied on its alleged inaccuracies, including that customers’ interests always come first “and that” integrity and honesty are at the heart of our business.

The class action – Arkansas Teachers Retirement System vs. Goldman Sachs Group – accuses investment bank of cracking down on covert deals with notable hedge fund manager and other conflicts of interest before financial crisis of 2008. The lawsuit, which was initiated by three pension plans, accuses Goldman of falsely inflating his capacity to manage conflict. It also indicates that shareholders lost more than $ 13 billion from February 2007 to June 2010.

The court rejected Goldman’s contention that class actions based on “general” statements should not be allowed because it could cause securities fraud claims to become “a form of investor insurance” sparking waves of warrantless litigation.

“We are not blind to the widely held idea that class certification can put pressure on defendants to settle important claims, meritorious or not, because of the financial risk of going to trial,” wrote circuit judge Richard Wesley. “But our law already pushes back this horrific parade.”

The lawsuit stems from numerous secured debt obligations (CDOs), including Abacus 2007 AC-1, which was at the heart of a US Securities and Exchange Commission (SEC) investigation. Goldman settled in 2010 for $ 550 million in a civil lawsuit.

Goldman admitted it was a “mistake” not to disclose the involvement of hedge fund manager John Paulson, who was instrumental in selecting certain mortgages to include in Abacus, and then bet against the CDO by the short selling bias. He made a profit of about $ 1 billion “at the expense of CDO investors,” according to the Reuters report.

Ten years after the financial crisis, seven executives of the largest American banks have been roasted on Capitol Hill in April 2019 before the United States House Committee on Financial Services. Some of the leaders who testified sought to paint a picture that lessons have been learned and things have improved, even against a backdrop of slowing economic growth.

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