Goldman Sachs 2012 Annual Report Download - page 210

Notes to Consolidated Financial Statements
RALI Pass-Through Certificates Litigation. GS&Co. is
among numerous underwriters named as defendants in a
putative securities class action initially filed in
September 2008 in New York Supreme Court, and
subsequently removed to the U.S. District Court for the
Southern District of New York. As to the underwriters,
plaintiffs allege that the offering documents in connection
with various offerings of mortgage-backed pass-through
certificates violated the disclosure requirements of the
federal securities laws. In addition to the underwriters, the
defendants include Residential Capital, LLC (ResCap),
Residential Accredit Loans, Inc. (RALI), Residential
Funding Corporation (RFC), Residential Funding Securities
Corporation (RFSC), and certain of their officers and
directors. On March 31, 2010, the defendants’ motion to
dismiss was granted in part and denied in part by the
district court, resulting in dismissal on the basis of standing
of all claims relating to offerings in which no plaintiff
purchased securities and, by an order dated
January 3, 2013, the district court denied, without
prejudice, plaintiffs’ motion for reconsideration. In
June and July 2010, the lead plaintiff and five additional
investors moved to intervene in order to assert claims based
on additional offerings (including two underwritten by
GS&Co.). On April 28, 2011, the court granted
defendants’ motion to dismiss as to certain of these claims
(including those relating to one offering underwritten by
GS&Co. based on a release in an unrelated settlement), but
otherwise permitted the intervenor case to proceed. By an
order dated January 3, 2013, the district court denied the
defendants’ motions to dismiss certain of the intervenors’
remaining claims as time barred. Class certification of the
claims based on the pre-intervention offerings was initially
denied by the district court, and that denial was upheld on
appeal; however, following remand, on October 15, 2012,
the district court certified a class in connection with the pre-
intervention offerings. On November 5, 2012, the
defendants filed a petition seeking leave from the U.S.
Court of Appeals to appeal the certification order. By an
order dated January 3, 2013, the district court granted the
plaintiffs’ application to modify the class definition to
include initial purchasers who bought the securities directly
from the underwriters or their agents no later than ten
trading days after the offering date (rather than just on the
offering date). On January 18, 2013, the defendants filed a
supplemental petition seeking leave from the U.S. Court of
Appeals to appeal the order modifying the class definition.
GS&Co. underwrote approximately $1.28 billion principal
amount of securities to all purchasers in the offerings for
which claims have not been dismissed. On May 14, 2012,
ResCap, RALI and RFC filed for Chapter 11 bankruptcy in
the U.S. Bankruptcy Court for the Southern District of New
York and the action has been stayed with respect to them,
RFSC and certain of their officers and directors.
MF Global Securities Litigation. GS&Co. is among
numerous underwriters named as defendants in class action
complaints filed in the U.S. District Court for the Southern
District of New York commencing November 18, 2011.
These complaints generally allege that the offering
materials for two offerings of MF Global Holdings Ltd.
convertible notes (aggregating approximately $575 million
in principal amount) in February 2011 and July 2011,
among other things, failed to describe adequately the
nature, scope and risks of MF Global’s exposure to
European sovereign debt, in violation of the disclosure
requirements of the federal securities laws. On
August 20, 2012, the plaintiffs filed a consolidated
amended complaint and on October 19, 2012, the
defendants filed motions to dismiss the amended complaint.
GS&Co. underwrote an aggregate principal amount of
approximately $214 million of the notes. On
October 31, 2011, MF Global Holdings Ltd. filed for
Chapter 11 bankruptcy in the U.S. Bankruptcy Court in
Manhattan, New York.
GS&Co. has also received inquiries from various
governmental and regulatory bodies and self-regulatory
organizations concerning certain transactions with MF
Global prior to its bankruptcy filing. Goldman Sachs is
cooperating with all such inquiries.
208 Goldman Sachs 2012 Annual Report