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Goldman Sachs must once again face class action on securities fraud



(Reuters) – Goldman Sachs Group Inc. must once again face a class action lawsuit by shareholders who said they lost $ 13 billion because the Wall Street bank hid conflicts of interest when it created risky subprime securities before the 2008 financial crisis, a judge ruled Wednesday

USA District Judge Paul Crotty in Manhattan rejected Goldman's claim that its general statements about its business, including that customers' interests "always come first" and "integrity and honesty are at the core of our business", were too generic to mislead investors and affect its stock.

Shareholders accused Goldman of hiding its packaging and selling off debt securities with collateral they wanted to fail so that benefiting customers such as hedge fund billionaire John Paulson could secretly bet against them. They said Goldman's stock price fell when the truth became known.

Goldman declined to comment. Darren Robbins, a lawyer for shareholders including the Arkansas Teacher Retirement System, said they were ready to move the 1

1-year-old case to trial.

The case had gone to the US Supreme Court, which said in June that lower courts could use expert opinions and "a good dose of common sense" to determine whether generic statements affected stock prices.

By applying that decision, Judge Crotty said that even Goldman's more generic statements could reinforce misconceptions about its practice, and that Goldman provided no evidence that its share price would have "held on" if it had revealed its conflicts.

Crotty noted Goldman's claim that dozens of blue-chip companies make similar statements, saying he was "hard pressed" to understand why such statements would achieve "such public benefit" if they had no effect on stock prices.

The judge said that Goldman did not show it more likely than not that its alleged inaccuracies "had no effect on prices."

1988, supr. eme Court said investors could rely on an assumption that all public information about a company was reflected in its share price.

Goldman reached a $ 550 million deal in 2010 and resolved allegations by the US Securities and Exchange Commission role in creating the Abacus 2007-AC1 CDO, and that he invested $ 1 billion against it.

The case is In re Goldman Sachs Group Inc. Securities Litigation US District Court, Southern District of New York, No. 10-03461.

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