Legal
US Supreme Court Denies Goldman Sachs’ Plea To Raise Limits On Shareholder Fraud Lawsuits
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At issue was an investor lawsuit filed in 2011 alleging that the US firm artificially inflated its share price prior to, during and after the financial dramas of 2007-08.
The US Supreme Court yesterday rejected a plea from Goldman Sachs to lift
requirements for shareholder lawsuits alleging fraud. However, it
returned a class-action lawsuit against the company to a lower
court for further proceedings, media reports said.
At issue was an investor lawsuit filed in 2011 alleging that the
US firm artificially inflated its share price before, during and
after the 2007-08 financial crisis. The suit said the firm
falsely claimed that it was complying with ethical rules when in
it had conflicts of interest in its packaging and selling of
mortgage-backed securities.
One of the plaintiffs in the case was the Arkansas Teacher
Retirement System, which alleged that Goldman Sachs was
fraudulent with the effect of artificially maintaining Goldman’s
stock price.
Responding to the court’s action this week, the Arkansas Teacher
Retirement System said: “We applaud the US Supreme Court for
upholding investor rights in its decision in the Goldman Sachs
Group vs Arkansas Teacher Retirement System, et al. case,
rejecting Goldman’s cynical attempt to evade accountability by
shifting the burden of proof onto investors.” “By upholding
existing law, with the burden of persuasion firmly on the
defendants, the Court’s decision upholds the rights of investors
to seek accountability in the future. The consequences of giving
Goldman (and other companies) an explicit green light for
misconduct would have been devastating for investor confidence in
the markets. Should Goldman choose to characterize this as a
‘win,’ it will say a great deal about how the company sees
foot-dragging and justice deferred for investors as good
things.”
“While the case was remanded back to the Second Circuit, nothing
in the decision suggests that the Second Circuit decision to
certify the class was made in error. Indeed, we agree with
Justice Sotomayor that it was not. We are hopeful that the case
will finally be able to proceed once the Second Circuit reviews
all of the evidence pursuant to the Court’s decision, giving
Goldman’s investors long overdue justice,” the group
added.
The US bank is quoted (Wall Street Journal, June 21) as
saying: “Our reputation is one of our most important assets. We
have extensive procedures and controls that are designed to
identify and address conflicts of interest.”