US pensions file legal actions against Goldman Sachs
GLOBAL - Two US pension funds are among a number of plaintiffs filing class action lawsuits against Goldman Sachs in the wake of the US Securities and Exchange Commission's (SEC) decision to sue the company for fraud.
In a filing with the SEC earlier this week, Goldman Sachs stated in the document that since 22 April 2010 "several putative shareholder derivative actions have been filed" in the New York Supreme Court and United States District Court for the Southern District of New York. (See earlier IPE article: Goldman's troubles to worsen as pension fund class actions loom)
The company documents show six shareholder complaints against Goldman Sachs, its board of directors, and certain officers and employees of the firm and its affiliates. The legal actions allege "breach of fiduciary duty, corporate waste, abuse of control, mismanagement and unjust enrichment in connection with collateralized debt obligation offerings made between 2004 and 2007, and challenging the accuracy and completeness of Goldman Sachs' disclosure".
Of the six complaints detailed in the 8-K filing, five relate to individual shareholders and one is an amended joint filing on behalf of the Southeastern Pennsylvania Transportation Authority and International Brotherhood of Electrical Workers Local 98 Pension Fund.
The allegations made by the pension funds have been amended from those originally claimed, which related to the executive compensation policy at the firm and included the claim that Goldman Sachs' "pursuit of huge profits" had given rise "to an expansion of Goldman's trading business that is a 'moral bankruptcy', fraught with conflicts of interest and the systemic breaking of ethical lines".
In the document the two pension funds stated they had amended their existing shareholder derivative action to "remedy the defendants' failure to act in the interests of Goldman and its shareholders, to remedy their breaches of fiduciary duty… and to assure that any prospective fees, fines or taxes imposed by any federal or state regulator or governmental unit on Goldman related to its abusive compensation practices be borne solely by Goldman management from their future compensation".
Meanwhile, Goldman Sachs also confirmed in the filing that on 23 April 2010 another US pension scheme, the Louisiana Municipal Police Employees Retirement System, expanded its earlier demand for the board to investigate and take action in connection with auction rate securities matters. These matters included alleged misconduct in connection with the Abacus CDO offering made in 2007, the subject of the SEC's investigation and civil action announced in April.
While US pension schemes have taken the lead in filing actions against the company, Goldman Sachs admitted it "anticipates that additional putative shareholder derivative actions and other litigation may be filed, and regulatory and other investigations and actions commenced, with respect to offerings of CDOs".
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