WSJ:
NEW YORK (Dow Jones)--Merrill Lynch & Co. engaged in the "same type of fraudulent conduct" that Goldman Sachs Group Inc. (GS) was accused of committing by the U.S. Securities & Exchange Commission in a lawsuit on Friday, a Dutch bank said Friday.
In a letter filed in New York State Supreme Court in Manhattan on Friday, lawyers for Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, or Rabobank, said Merrill Lynch committed a similar fraud in the structuring of a $1.5 billion collateralized debt obligation, known as Norma CDO Ltd.
"The SEC charges bear directly on the sufficiency of Rabobank's complaint as Rabobank has alleged that Merrill Lynch engaged in precisely the same type of fraudulent conduct in the structuring and marketing of Norma through having failed to disclose that Norma's collateral pool had been selected to benefit short positions taken by" an equity investor in Norma, said Jonathan Pickhardt, a lawyer for Rabobank.
Rabobank sued Merrill Lynch in New York state court last year, alleging it was owed about $45 million in a senior secured loan when the CDO defaulted and was liquidated in 2008.
The Dutch bank claimed Merrill Lynch misrepresented that the CDO was carefully structured investment vehicle when Rabobank made a $57.7 million upfront loan in March 2007.
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