Goldman Sachs 2012 Annual Report Download - page 204

Notes to Consolidated Financial Statements
Fannie Mae Litigation. GS&Co. was added as a
defendant in an amended complaint filed on
August 14, 2006 in a purported class action pending in the
U.S. District Court for the District of Columbia. The
complaint asserts violations of the federal securities laws
generally arising from allegations concerning Fannie Mae’s
accounting practices in connection with certain Fannie
Mae-sponsored REMIC transactions that were allegedly
arranged by GS&Co. The complaint does not specify a
dollar amount of damages. The other defendants include
Fannie Mae, certain of its past and present officers and
directors, and accountants. By a decision dated
May 8, 2007, the district court granted GS&Co.’s motion
to dismiss the claim against it. The time for an appeal will
not begin to run until disposition of the claims against other
defendants. A motion to stay the action filed by the Federal
Housing Finance Agency (FHFA), which took control of
the foregoing action following Fannie Mae’s
conservatorship, was denied on November 14, 2011.
Compensation-Related Litigation. On January 17, 2008,
Group Inc., its Board, executive officers and members of its
management committee were named as defendants in a
purported shareholder derivative action in the U.S. District
Court for the Eastern District of New York predicting that
the firm’s 2008 Proxy Statement would violate the federal
securities laws by undervaluing certain stock option awards
and alleging that senior management received excessive
compensation for 2007. The complaint seeks, among other
things, an equitable accounting for the allegedly excessive
compensation. Plaintiff’s motion for a preliminary injunction
to prevent the 2008 Proxy Statement from using options
valuations that the plaintiff alleges are incorrect and to
require the amendment of SEC Forms 4 filed by certain of the
executive officers named in the complaint to reflect the stock
option valuations alleged by the plaintiff was denied, and
plaintiff’s appeal from this denial was dismissed. On
February 13, 2009, the plaintiff filed an amended complaint,
which added purported direct (i.e., non-derivative) claims
based on substantially the same theory. The plaintiff filed a
further amended complaint on March 24, 2010, and the
defendants’ motion to dismiss this further amended
complaint was granted on the ground that dismissal of the
shareholder plaintiff’s prior action relating to the firm’s 2007
Proxy Statement based on the failure to make a demand to
the Board precluded relitigation of demand futility. On
December 19, 2011, the appellate court vacated the order of
dismissal, holding only that preclusion principles did not
mandate dismissal and remanding for consideration of the
alternative grounds for dismissal. On April 18, 2012,
plaintiff disclosed that he no longer is a Group Inc.
shareholder and thus lacks standing to continue to prosecute
the action. On January 7, 2013, the district court dismissed
the claim due to the plaintiff’s lack of standing and the lack of
any intervening shareholder.
On March 24, 2009, the same plaintiff filed an action in
New York Supreme Court, New York County, against
Group Inc., its directors and certain senior executives
alleging violation of Delaware statutory and common law
in connection with substantively similar allegations
regarding stock option awards. On January 4, 2013,
another purported shareholder moved to intervene as
plaintiff, which defendants have opposed. On
January 15, 2013, the court dismissed the action only as to
the original plaintiff with prejudice due to his lack
of standing.
Mortgage-Related Matters. On April 16, 2010, the SEC
brought an action (SEC Action) under the U.S. federal
securities laws in the U.S. District Court for the Southern
District of New York against GS&Co. and Fabrice Tourre,
a former employee, in connection with a CDO offering
made in early 2007 (ABACUS 2007-AC1 transaction),
alleging that the defendants made materially false and
misleading statements to investors and seeking, among
other things, unspecified monetary penalties. Investigations
of GS&Co. by FINRA and of GSI by the FSA were
subsequently initiated, and Group Inc. and certain of its
affiliates have received subpoenas and requests for
information from other regulators, regarding CDO
offerings, including the ABACUS 2007-AC1 transaction,
and related matters.
On July 14, 2010, GS&Co. entered into a consent agreement
with the SEC, settling all claims made against GS&Co. in the
SEC Action, pursuant to which GS&Co. paid $550 million
of disgorgement and civil penalties, and which was approved
by the U.S. District Court for the Southern District of New
York on July 20, 2010.
202 Goldman Sachs 2012 Annual Report