Goldman Wins Dismissal Of Paulson-Linked CDO Lawsuit

May 15 2013 | 1:51pm ET

A New York court threw out a collateralized debt obligation lawsuit against Goldman Sachs, leaving Paulson & Co. to defend the allegations alone—for now.

The New York State Supreme Court's Appellate Decision dismissed ACA Financial Guaranty's lawsuit, which accused Goldman and Paulson of misleading it about the hedge fund's role in the CDO. ACA, which both invested in and insured Abacus, alleges that Paulson and Goldman conspired to conceal the former's role in selecting the securities that went into Abacus and then the fact the Paulson was shorting the CDO.

But the Appellate Division, in a split, 3-2 decision, ruled that ACA should have known what was going on, calling the firm a "highly sophisticated commercial entity."

ACA said it would appeal the dismissal to New York's highest court, and might ask that Appellate Division to reconsider its decision. Goldman said it was "pleased with the court's decision."

The dismissal of ACA's claims against Goldman do not affect its claims against Paulson, which was added to the lawsuit in January. Paulson is seeking a dismissal from a trial-court judge, which Goldman sought and failed to receive, leading to the successful appeal.

According to ACA, Paulson agreed to play the role of an "equity investor" while actually betting against Abacus. A Goldman executive told ACA that Paulson's interest in Abacus was "100% equity," according to a transcript of a telephone call.


In Depth

Q&A: Reg A+ Will Transform the Alternative Asset Landscape

Jul 7 2015 | 4:03pm ET

In addition to easing capital formation for small companies, Regulation A+ has enormous...

Lifestyle

Fiat Chrysler Files Paperwork For Ferrari IPO

Jul 23 2015 | 5:05pm ET

Italian sportscar maker Ferrari has taken a step closer to a stock market listing...

Guest Contributor

6 Essential Principles To Balance Your Investment Risk

Jun 26 2015 | 10:07am ET

In this article, financial expert Greg Silberman explores how to hedge a private...

 

Editor's Note