WASHINGTON, D.C. - (Mealey's) Under-fire investment banking and securities firm Goldman Sachs Group Inc. has been hit with six shareholder derivative lawsuits in connection with its sale of collateralized debt obligations (CDOs) and its marketing of the CDOs to investors, according to a disclosure form Goldman filed with the Securities and Exchange Commission May 3.
According to Goldman's SEC Form 8-K, "Since April 22, 2010, several putative shareholder derivative actions have been filed in New York Supreme Court, New York County, and the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (GS Inc.), it Board of Directors (Board), and certain officers and employees of GS Inc. and its affiliates generally alleging claims for breach of fiduciary duty, corporate waste, abuse of control, mismanagement and unjust enrichment in connection with [CDO] offerings made between 2004 and 2007, and challenging the accuracy and completeness of GS, Inc.'s disclosure."
"These derivative complaints seek, among other things, declaratory relief, unspecified compensatory damages, restitution and certain corporate governance reforms. In addition, plaintiffs in an existing purported shareholder derivative action in the Delaware Court of Chancery relating to compensation levels for 2009 have amended their complaint to assert, among other things, allegations similar to those in the derivative complaints referred to above," Goldman says.
Goldman also disclosed in the Form 8-K that on April 23, a Goldman shareholder, "which had previously made a demand that the Board investigate and take action in connection with auction rate securities matters, expand its demand to address other alleged misconduct by Goldman, Sachs & Co., the Board and certain officers and employees of GS Inc. and its affiliates."
"The alleged misconduct was in connection with (i) a collateralized debt obligation offering made in early 2007 (the 2007 Transaction) that is the subject of a U.S. Securities and Exchange Commission investigation and a civil action brought by the SEC on April 16, 2010 [See April 2010, Page 5], (ii) the alleged failure by GS Inc. to adequately disclose the SEC investigation, and (iii) GS Inc.'s 2009 compensation practices," Goldman says.
Moreover, Goldman discloses that it "has been the subject of other legal claims and regulatory inquiries and investigations with respect to the 2007 Transaction and the related SEC investigation and civil action, including purported securities law class actions that name as defendants GS Inc. and certain senior executives (including Lloyd C. Blankfein and Gary D. Cohn, who are members of the Board), allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and seek unspecified damages."
Goldman further contends that it anticipates the filing of additional actions, both derivative and "other litigation," as well as the commencement of additional "regulatory and other investigations and actions" with regard to the CDO offerings.
Copies of the shareholder derivative complaints and the demand letter are attached as exhibits to the Form 8-K.
[Editor's Note: Full coverage will be in the May issue of the LexisNexis Financial Services Litigation Report. In the meantime, the Form 8-K is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844. Document #88-100525-040B. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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Read a summary of Moore's Federal Practice's chapter on derivative actions.