Goldman Sachs 2015 Annual Report Download - page 211

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Mortgage-Related Matters. Beginning in April 2010, a
number of purported securities law class actions were 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, the firm’s conflict of interest management,
and the SEC investigation that led to GS&Co. entering into
a consent agreement with the SEC, settling all claims made
against GS&Co. by the SEC in connection with the
ABACUS 2007-AC1 CDO offering (ABACUS 2007-AC1
transaction), pursuant to which GS&Co. paid $550 million
of disgorgement and civil penalties. The consolidated
amended complaint filed on July 25, 2011, which names as
defendants Group Inc. and certain officers and employees
of Group Inc. and its affiliates, generally alleges violations
of Sections 10(b) and 20(a) of the Exchange Act and seeks
unspecified damages. On 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. The
district court granted class certification on
September 24, 2015, but the appellate court granted
defendants’ petition for review on January 26, 2016. On
February 1, 2016, the district court stayed proceedings in
the district court pending the appellate court’s decision.
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 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. On May 28, 2013,
Group Inc. informed the shareholder that the Board
completed its investigation and determined to refuse the
demand. On June 20, 2013, the shareholder made a books
and records demand requesting materials relating to the
Board’s determination. The parties have agreed to stay
proceedings in the putative derivative action pending
resolution of the books and records demand.
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.
GS&Co., Goldman Sachs Mortgage Company and GS
Mortgage Securities Corp. and three current or former
Goldman Sachs employees are defendants in a putative
class action commenced on December 11, 2008 in the U.S.
District Court for the Southern District of New York
brought on behalf of purchasers of various mortgage pass-
through certificates and asset-backed certificates issued by
various securitization trusts established by the firm and
underwritten by GS&Co. in 2007. On June 3, 2010,
another investor filed a separate putative class action
asserting substantively similar allegations relating to one
other offering and thereafter moved to further amend its
amended complaint to add claims with respect to two
additional offerings. On December 30, 2015, the district
court preliminarily approved a settlement covering both
actions. The firm has paid the full amount of the proposed
settlement into an escrow account.
On September 30, 2010, a class action was filed in the U.S.
District Court for the Southern District of New York
against GS&Co., Group Inc. and two former GS&Co.
employees on behalf of investors in $823 million of notes
issued in 2006 and 2007 by two synthetic CDOs (Hudson
Mezzanine 2006-1 and 2006-2). On November 2, 2015,
the parties reached a settlement in principle, subject to
documentation and court approval. The firm has reserved
the full amount of the proposed settlement.
Goldman Sachs 2015 Form 10-K 199