Goldman Sachs 2012 Annual Report Download - page 205

Notes to Consolidated Financial Statements
On January 6, 2011, ACA Financial Guaranty Corp. filed
an action against GS&Co. in respect of the
ABACUS 2007-AC1 transaction in New York Supreme
Court, New York County. The complaint includes
allegations of fraudulent inducement, fraudulent
concealment and unjust enrichment and seeks at least
$30 million in compensatory damages, at least $90 million
in punitive damages and unspecified disgorgement. On
April 25, 2011, the plaintiff filed an amended complaint
and, on June 3, 2011, GS&Co. moved to dismiss the
amended complaint. By a decision dated April 23, 2012, the
court granted the motion to dismiss as to the unjust
enrichment claim and denied the motion as to the other
claims, and on May 29, 2012, GS&Co. appealed the
decision to the extent that its motion was denied and filed
counterclaims for breach of contract and fraudulent
inducement, and third-party claims against ACA
Management, LLC for breach of contract, unjust
enrichment and indemnification. ACA Financial Guaranty
Corp. and ACA Management, LLC moved to dismiss
GS&Co.’s counterclaims and third-party claims on
August 31, 2012. On January 30, 2013, the court granted
ACA’s motion for leave to file an amended complaint
naming a third party to the ABACUS 2007-AC1
transaction as an additional defendant.
Since April 23, 2010, the Board has received letters from
shareholders demanding that the Board take action to
address alleged misconduct by GS&Co., the Board and
certain officers and employees of Group Inc. and its
affiliates. These demands, which the Board has rejected,
generally alleged misconduct in connection with the firm’s
securitization practices, including the ABACUS 2007-AC1
transaction, the alleged failure by Group Inc. to adequately
disclose the SEC investigation that led to the SEC Action,
and Group Inc.’s 2009 compensation practices. In addition,
the Board has received books and records demands from
several shareholders for materials relating to, among other
subjects, the firm’s mortgage servicing and foreclosure
activities, participation in federal programs providing
assistance to financial institutions and homeowners, loan
sales to Fannie Mae and Freddie Mac, mortgage-related
activities and conflicts management.
Beginning April 26, 2010, a number of purported securities
law class actions have been filed in the U.S. District Court
for the Southern District of New York challenging the
adequacy of Group Inc.’s public disclosure of, among other
things, the firm’s activities in the CDO market and the SEC
investigation that led to the SEC Action. The purported
class action complaints, which name as defendants Group
Inc. and certain officers and employees of Group Inc. and
its affiliates, have been consolidated, generally allege
violations of Sections 10(b) and 20(a) of the Exchange Act
and seek unspecified damages. Plaintiffs filed a
consolidated amended complaint on July 25, 2011. On
October 6, 2011, the defendants moved to dismiss, and by a
decision dated June 21, 2012, the district court dismissed
the claims based on Group Inc.’s not disclosing that it had
received a “Wells” notice from the staff of the SEC related
to the ABACUS 2007-AC1 transaction, but permitted the
plaintiffs’ other claims to proceed.
On February 1, 2013, a putative shareholder derivative
action was filed in the U.S. District Court for the Southern
District of New York against Group Inc. and certain of its
officers and directors in connection with mortgage-related
activities during 2006 and 2007, including three CDO
offerings. The derivative complaint, which is based on
similar allegations to those at issue in the consolidated class
action discussed above and purported shareholder
derivative actions that were previously dismissed, includes
allegations of breach of fiduciary duty, challenges the
accuracy and adequacy of Group Inc.’s disclosure and
seeks, among other things, declaratory relief, unspecified
compensatory and punitive damages and restitution from
the individual defendants and certain corporate
governance reforms.
In June 2012, the Board received a demand from a
shareholder that the Board investigate and take action
relating to the firm’s mortgage-related activities and to
stock sales by certain directors and executives of the firm.
On February 15, 2013, this shareholder filed a putative
shareholder derivative action in the New York Supreme
Court, New York County, against Group Inc. and certain
current or former directors and employees, based on these
activities and stock sales. The derivative complaint includes
allegations of breach of fiduciary duty, unjust enrichment,
abuse of control, gross mismanagement and corporate
waste, and seeks, among other things, unspecified monetary
damages, disgorgement of profits and certain corporate
governance and disclosure reforms.
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