Paulson Added To Goldman CDO Lawsuit

Jan 3 2013 | 11:43am ET

Paulson & Co. has been sued for its role in a controversial Goldman Sachs collateralized debt obligation.

ACA Financial Guaranty Corp., which invested in and insured the CDO, Abacus-2007-AC1, added Paulson as a defendant in its lawsuit against Goldman, filed two years ago. ACA alleges that the hedge fund "at a bare minimum…gave Goldman Sachs substantial assistance in achieving the fraud."

According to ACA, Goldman misled it about Paulson's role in selecting the securities that went in to Abacus. The company claims the CDO was already "worthless" when Goldman marketed it to ACA.

According to the Securities and Exchange Commission, Abacus was structured and marketed on Paulson's behalf, and the hedge fund was shorting it. Paulson called ACA's amended complaint "completely without merit."

"As there is no basis in law or fact for the proposed amendment, Paulson will defend itself against this baseless action if the amendment is allowed," spokesman Armel Leslie said.

ACA had sought $120 million from Goldman.

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