Goldman Sachs Shareholder Lawsuit Accuses CEO Lloyd Blankfein, Board Of 'Systematic Failure'

NEW YORK — Goldman Sachs's CEO and other top officers are accused in a pair of shareholder lawsuits of lax oversight in deals involving risky mortage-backed securities that later went bad.

The lawsuits filed Thursday in New York State Supreme Court name Lloyd Blankfein and the firm's entire board of directors as defendants.

The suits follow civil fraud charges filed last week by the Securities and Exchange Commission over the same investments.

The SEC says Goldman committed fraud by failing to disclose important information about the securities that might have scared off investors.

The two suits, filed by shareholders Robert Rosinek and Morton Spiegel, accuse Blankfein and other officers of "systematic failure" over 3 1/2 years for not properly vetting 23 mortgage-linked deals at the center of the SEC suit. Those deals, called Abacus, led to $1 billion in losses.

A Goldman spokesman declined to comment.

The suits appear to be the first shareholder cases related to the Abacus deals. If so, they may mark the start of what legal experts expect will be a flood of shareholder cases against Goldman Sachs.

The plaintiffs seek unspecified monetary damages.

The mortgage-backed securities at the heart of the lawsuits are widely blamed for worsening the financial system's troubles by allowing investors to place massive bets on the direction of the housing market. That triggered major losses at a number of financial institutions after the housing market started to crumble.

As in the SEC case, the shareholders allege that Goldman should have noted in marketing the Abacus securities that a hedge fund betting they would fall in value had helped choose the mortgages on which they were based.

Within a few months of being sold to investors, the value of the Abacus securities fell fast. The hedge fund, Paulson & Co., run by billionaire John Paulson, pocketed $1 billion in profits, the suits says.

Paulson has not been accused of wrongdoing by SEC, and is not as a defendant in the shareholder cases.

Comments

[Patrick Alspaugh]

01:30 PM on 04/27/2010

This suit is meaningless. I wouldn't be surprised if the GS executives orchestrated it themselves to counter-balance the SEC case, that's where the real fraud happened.

[VietnamVeteran]

03:08 PM on 04/26/2010

New Headline. 50 State Attorney Generals to Investigate, Prosecute, and fine Goldman and others.

Prosecute and fine with extreme prejudice. Watch bank stocks (investment banks and commercial) plummet once again.........Attorney Generals will be charging ahead with fines. Let the bleeding cleanse the fraudulent. Let's jail mainstream the guilty with prison population. This last collapse could have been prevented. No balls (previously) at SEC. No experienced "I give a shot" attorneys working there. Staff standing in awe of the bright shining lie.

CDO’s were underlying assets in at least One TRILLION of bond fund investments, sold to the public by brokers and bankers as less risk and conservative investments.

Join the party; contact your state's attorney general for more justice. States residents who lost money are entitled to recover their loss.

[oberstminga]

02:22 PM on 04/26/2010

"I want to tell you something very clear, don't worry about American pressure on Israil, we the Yewish people control America, and the Americans know it." Ariel Sharon to Shimon Peres, October 3rd, 2001,
"Yews are the master robbers of the modern age" Napoleon de Bonaparte
"I fear the Yewish banks with their craftiness and tortuous tricks will entirely control the exuberant riches of America. And use it to systematically corrupt modern civilization. The Yews will not hesitate to plunge the whole of Christendom into wars and chaos that the earth should become their inheritance." Bismarck

It's all Yiddischer game of who can fleece the Americans of the most before they run off to non-indictable former Palestina.
A short list: Kohn $2+ billion, Sam Israel $450 million, Paul Greenwood and Steve Walsh $550 million, Artie Nadel $350 million, Bruce Friedman $216 million, Wachovia Bank- Sandlers 1-2 billion, Lehman Brothers- unknown millions, Bear Sterns- hundreds of millions.

[schatsie]

06:34 PM on 04/26/2010

and now Billy Gates, Warren Buffett (majority shareholder in Moody's and Steve Jobs and Larry Ellison are all Jewish, let alone the Bushs and Cheneys.....Jews are less than 1% of the popullation, it takes the WASP Mafiosa to really screw it up.

[FlawdaBoy]

03:25 PM on 04/25/2010

Blankfein is really creeping me out with that smile, laughing all the way (back) to the bank. "My preciousssssssss!"

[Skeetshooter]

12:43 PM on 04/25/2010

Blankfein and cronies took the trouble to lie to shareholders in their annual report, proving they knew they were doing them dirty. These guys belong in the same chain gang as Bernie Madoff and Jeff Skilling, whose recent appeal to the supreme court raises the question; how do you find an impartial jury when these guys screwed the whole world?

[schatsie]

06:35 PM on 04/26/2010

The Supreme Court will find Shilling to be innocent and there is no Jury for the Supreme Court....

[McGruff]

12:29 PM on 04/25/2010

WOW !

How does the government then order you to obey the law ... and pay your taxes ... or go to jail?

Seriously ... think about it.

[schatsie]

06:37 PM on 04/26/2010

Seriously, think about it we already have incarcerated more people than the rest of the world put together and for laws that are prima facie discriminatory....Don't worry the rich will get away with the goods already moved to the Swiss Bank Accounts.

[Carolab]

12:53 AM on 04/25/2010

Isn't anyone going to go after Paulson?

[Acharn]

08:09 AM on 04/25/2010

Why would they? What he did wasn't illegal. And, actually, Goldman didn't do anything illegal when they let him pick the mortgage bonds (for a hefty fee). What they did that was illegal was to sell the CDO's without telling their other customers that another customer had designed them to fail. And apparently this shareholder suit is saying that Goldman Sachs didn't adequately hedge their investment, so they lost money on the project despite the fees they got from Paulson. Paulson's investors made out very well, they have no reason to sue him.

[Carolab]

10:15 AM on 04/25/2010

What he did was insider trading and aiding and abetting a fraud. The issue is that Goldman didn't disclose that Paulson picked them BECAUSE they were designed to fail and then represented them as "blessed" by ACA and investment grade rated.

[Carolab]

10:17 AM on 04/25/2010

The SEC case hinges on two key allegations: that Goldman misled ACA by not disclosing Paulson's intention to bet AGAINST the portfolio and

that Goldman deceived other investors by not disclosing Paulson's role in selecting the mortgages in the security.

[PhilipTaylor]

11:13 PM on 04/25/2010

Paulson and Goldman MANUFACTURED THE "PERFECT" INSIDER TRADE!

100% PROBABILITY OF FAILURE FOR G0LDMAN CLIENTS AND SUCCESS FOR PAULSON!

Never been a MORE PERFECT INSIDER TRADE WITH AS MUCH PAYOFF!

[willisbones]

12:29 AM on 04/25/2010

I thought the idea behind campaign finance reform was to stop the big money people from buying the politicians.

Can't we get rid of the lobbyists and corruption money buys?

[Acharn]

08:12 AM on 04/25/2010

No. As Mark Twain put it, "America has no distinct native criminal class, except, of course, Congress." Why on earth would they be willing to give up their plush perquisites?

[calmom55]

12:28 AM on 04/25/2010

Five years ago I spent $20,000 suing Goldman Sachs because they forged my signature on an annuity I didn't want. Their attorneys chewed me up and spit me out because all I had on my side was the truth, which at that time, the SEC wasn't interested in. So I'm cheering them on. Get Goldman!

[TinfoilLatte]

11:59 PM on 04/24/2010

Wow. The mini picture and this one is very suiting.

[Aerows]

11:49 PM on 04/24/2010

As a rule, I dislike bread. I picked up a loaf of delicious bread though, that is dark, and has a nutty taste. My teeth bite into it, and it is a savory experience. That is what the lawyers prosecuting GS must be experiencing right now - savory, tasty, delicious bites.

[realitytrumpsbull]

09:42 PM on 04/24/2010

More rich people fighting over money...if we send em seven bucks, would that help matters?

[Aerows]

11:52 PM on 04/24/2010

This isn't rich people fighting over money, it's people who got above the law, thinking that they will remain above the law simply because they have money.

The fewer GS mindset people we have in this world, the better off we all are.

[plaidsportcoat]

09:28 PM on 04/24/2010

Let's put social security money in the stock market!

[Aerows]

11:53 PM on 04/24/2010

Yeah, let's privatize everything so it can turn out like most people's pension funds have turned out.

[terry63]

08:57 PM on 04/24/2010

Gold sacks runs Washington, dont hold youre breath for justice.

[inthedesert]

08:43 PM on 04/24/2010

Funny how we have heard not much from Timmy Geithner....LOL.