Goldman Sachs Faces Dutch Pension Fund Suit Over Risky Mortgages

Dutch pension fund ABP is suing US investment bank Goldman Sachs for knowingly selling the scheme junk mortgages and providing misleading information. 

(January 30, 2012) — Banking giant Goldman Sachs has been sued by Dutch pension fund ABP over residential mortgage-backed securities.

ABP has accused the bank of relaying misleading information in regards to the creditworthiness of its bonds, which ended up being much riskier than the bank had suggested, Reuters initially reported. As a result, the Dutch pension suffered major losses. 

The case is Stichting Pensioenfonds ABP v. The Goldman Sachs Group, 650264/2012, New York state Supreme Court.

ABP has been one of many active players in the institutional investing space going after banks for allegedly misleading them about the quality of mortgage-based securities. In late December, ABP sued JPMorgan over residential mortgage-backed securities the scheme purchased. According to the lawsuit, filed in New York State Supreme Court in Manhattan, the Dutch fund purchased the pools of home loans based on false and misleading statements. The lawsuit noted that the mortgage loans backing the securities were taken out by borrowers “who were much less creditworthy than had been represented.”

The lawsuits against JP Morgan and Goldman Sachs coincide with calls from the US Department of Justice to create a special unit to investigate abusive lending and packaging of risky mortgages as part of President Obama’s 2012 agenda. 

In a statement released Friday, the Department of Justice asserted: “Beginning with its first full meeting…the Working Group will streamline and strengthen current and future efforts to identify, investigate, and prosecute instances of wrongdoing in the packaging, selling, and valuing of residential mortgage-backed securities. I am confident that this new effort will improve our ability to ensure justice for victims; help restore faith in our financial markets and institutions; and allow us to answer the call that President Obama issued earlier this week, in his State of the Union address.”

The unit will police major financial crimes, and will focus on both the origination and securitization (or packaging) of mortgage loans, according to Justice Department officials. The working group will be co-chaired by New York Attorney General Eric Schneiderman along with senior officials at the Department of Justice and Securities and Exchange Commission.