Wave of shareholder suits starts against Goldman

In a move that experts saw signaling a new wave of securities litigation, a shareholder class action has been filed against Goldman Sachs Group and three of its executives.

The prospective class action against Goldman Sachs Group and against three officers--CEO Lloyd Blankfein, CFO David Viniar and President and COO Gary Cohn--was filed yesterday in U.S. District Court in Manhattan on behalf of purchasers of common stock of Goldman Sachs Group between Oct. 15, 2009 and April 16, 2010.

The end of the class period coincides with the date on which the Securities and Exchange Commission sued Goldman Sachs, charging that the firm and one of its vice presidents, Fabrice Tourre, with defrauding investors in structuring and marketing a collateralized debt obligation known as ABACUS 2007-AC1.

The SEC alleges that Goldman marketed the ABACUS CDO tied to subprime mortgages without disclosing to investors that a hedge fund with economic interests adverse to theirs—Paulson & Company—played a key role in the portfolio selection process for the CDO.

The class action complaint filed by the Robbins Geller Rudman & Dowd law firm in New York alleges, among other things, that Goldman Sachs did not disclose to shareholders that it had received a Wells notice from the SEC in July 2009.

”Even as it responded to the SEC in the fall of 2009, Goldman continued to conceal from investors that it had received such a notice and was being invested by the SEC in connection with the events and practices surrounding the ABACUS 2007-AC1 transaction,” says the complaint brought by plaintiff Howard Sorkin on behalf of the class.

In October, the complaint continues, Goldman reported a 190 percent increase in year-over-year quarterly earnings and Goldman’s stock traded at artificially inflated prices during the class period—reaching a high of $188.63 on Oct. 15.

On April 16, after news of the SEC suit broke, Goldman’s stock closed at $160.70 per share. The full complaint is available at http://www.rgrdlaw.com/cases/goldmansachs/complaint.pdf.

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