Goldman Sachs sued by Liberty Mutual regarding losses from Freddie Mac investments

Liberty Mutual Insurance NewsInvestment banker Goldman Sachs & Co. was the target of a lawsuit by Liberty Mutual Insurance Co. and a number of its subsidiaries, for “making materially misleading statements and omissions” in November 2007, for Freddie Mac preferred stock offerings. 

According to the lawsuit which was filed at a Massachusetts U. S. District Court, Liberty Mutual and its subsidiaries – Employers of Wausau, Safeco, Liberty Life, and Peerless – had made investments of $37.5 million within the Freddie Mac (Federal Home Loan Mortgage Corp) Series Z offering, which was made up of shares supported by subprime mortgages that Goldman Sachs had underwritten. 

According to Liberty Mutual, if they had been advised of the Freddie Mac capitalization’s “true state”, then they would not bought the Series Z offerings.  They claim that Goldman Sachs behaved with “fraudulent conduct”, which caused them to lose all of their invested money on offerings that were “virtually worthless”. 

The insurers say that they have experienced significant losses on both the shares of the stocks that they have sold as well as the ones that they continue to hold.  They are seeking a jury trial and treble damages.  The suit claims that the investments sold by Goldman Sachs were of poor quality, and that their actions made the client’s financial interests secondary to its own. 

Goldman Sachs has announced that they intend to fight the lawsuit. According to Michael DuVally, a spokesperson for Goldman Sachs, “The suit is without merit and we will contest it vigorously.” 

Liberty Mutual had previously sued Goldman Sachs for a year ago over losses of $62.5 million of Fannie Mae preferred stock, which was purchased at the end of 2007.

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