Goldman Sachs 2012 Annual Report Download - page 206

Notes to Consolidated Financial Statements
GS&Co., Goldman Sachs Mortgage Company (GSMC)
and GS Mortgage Securities Corp. (GSMSC) 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. The complaint generally
alleges that the registration statement and prospectus
supplements for the certificates violated the federal
securities laws, and seeks unspecified compensatory
damages and rescission or rescissionary damages.
Following dismissals of certain of the plaintiff’s claims
under the initial and three amended complaints, on
May 5, 2011, the court granted plaintiff’s motion for entry
of a final judgment dismissing all its claims, thereby
allowing plaintiff to appeal. The plaintiff appealed from the
dismissal with respect to all 17 of the offerings included in
its original complaint. By a decision dated
September 6, 2012, the U.S. Court of Appeals for the
Second Circuit affirmed the district court’s dismissal of
plaintiff’s claims with respect to 10 of the offerings included
in plaintiff’s original complaint but vacated the dismissal
and remanded the case to the district court with
instructions to reinstate the plaintiff’s claims with respect to
the other seven offerings. On October 26, 2012, the
defendants filed a petition for certiorari with the U.S.
Supreme Court seeking review of the Second Circuit
decision. On October 31, 2012, the plaintiff served
defendants with a fourth amended complaint relating to
those seven offerings, plus seven additional offerings. On
June 3, 2010, another investor (who had unsuccessfully
sought to intervene in the action) filed a separate putative
class action asserting substantively similar allegations
relating to one of the offerings included in the initial
plaintiff’s complaint. The district court twice granted
defendants’ motions to dismiss this separate action, both
times with leave to replead. On July 9, 2012, that separate
plaintiff filed a second amended complaint, and the
defendants moved to dismiss on September 21, 2012. On
December 26, 2012, that separate plaintiff filed a motion to
amend the second amended complaint to add claims with
respect to two additional offerings included in the initial
plaintiff’s complaint. The securitization trusts issued, and
GS&Co. underwrote, approximately $11 billion principal
amount of certificates to all purchasers in the fourteen
offerings at issue in the complaints.
Group Inc., GS&Co., GSMC and GSMSC are among the
defendants in a separate putative class action commenced
on February 6, 2009 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 2006. The other original
defendants include three current or former Goldman Sachs
employees and various rating agencies. The second
amended complaint generally alleges that the registration
statement and prospectus supplements for the certificates
violated the federal securities laws, and seeks unspecified
compensatory and rescissionary damages. Defendants
moved to dismiss the second amended complaint. On
January 12, 2011, the district court granted the motion to
dismiss with respect to offerings in which plaintiff had not
purchased securities as well as all claims against the rating
agencies, but denied the motion to dismiss with respect to a
single offering in which the plaintiff allegedly purchased
securities. These trusts issued, and GS&Co. underwrote,
approximately $698 million principal amount of
certificates to all purchasers in the offerings at issue in the
complaint (excluding those offerings for which the claims
have been dismissed). On February 2, 2012, the district
court granted the plaintiff’s motion for class certification
and on June 13, 2012, the U.S. Court of Appeals for the
Second Circuit granted defendants’ petition to review that
ruling. On November 8, 2012, the court approved a
settlement between the parties, and GS&Co. has paid the
full amount of the settlement into an escrow account. The
time for any appeal from the approval of the settlement
has expired.
204 Goldman Sachs 2012 Annual Report