Goldman Sachs Sued by Allstate Over $100 Million in Mortgage Securities
By Karen Freifeld – Aug 16, 2011 12:01 AM ET
Goldman Sachs Group Inc. (GS) was sued by Allstate Insurance Co. over the sale of more than $100 million worth of residential mortgage-backed securities that the insurer claims the bank itself called “junk” and “lemons.”
Allstate asked for damages including the lost market value of the securities, plus principal and interest payments in the complaint filed today in New York state Supreme Court in Manhattan.
The insurer, based in Northbrook, Illinois, has filed similar suits against JPMorgan Chase & Co. over $700 million of mortgage-backed securities the bank sold the insurer; Credit Suisse Group AG (CSGN) units for more than $231 million of the securities; Bank of America Corp.’s Merrill Lynch unit over some $167 million; Citigroup Inc. (C), over more than $200 million; and Deutsche Bank AG (DBK), over about $185 million. Allstate said the banks misrepresented underwriting standards, owner occupancy data and loan-to-value ratios.
Goldman knew these types of securities were “junk,” “dogs,” “crap” and “lemons,” according to today’s suit, which claims the words are Goldman’s own, recently revealed in governmental investigations, to describe them.
Michael Duvally, a spokesman for Goldman Sachs, declined to comment on the suit.
Goldman Sachs said in a quarterly filing last week that Allstate was among entities that “threatened to assert claims against the firm in connection with various mortgage-related offerings.”
Allstate purchased more than $123 million of the securities from April 2006 to March 2007 in reliance on Goldman’s misrepresentations and omissions, according to the complaint.
The case is Allstate Insurance Co. v. Goldman Sachs & Co., 652273/2011, New York state Supreme Court (Manhattan).
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