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| | Liberty Mutual Sues Goldman Sachs
By Lonce LaMon - July 11, 2011
Liberty Mutual and some of its subsidiaries have filed a Complaint against Goldman Sachs & Company. Liberty is seeking a trial by jury and damages of more than $100 million.
The Complaint claims Goldman Sachs misled Liberty in a preferred stock offering for Federal Home Loan Mortgage Corporation, aka Freddie Mac, late in the year 2007.
Liberty Mutual invested $37.5 million in the offering and now according to the Complaint, the investment is virtually worthless. It also alleges Goldman Sachs violated state and federal securities laws.
The Complaint states that Goldman Sachs “had taken a short position on other securities backed by subprime residential mortgages that generated $3.7 billion in profits for the firm in 2007 alone,” and that this and other deceptive practices have already been recorded in a report to a U.S. Senate subcommittee earlier this year.
Goldman Sachs states the Complaint is without merit. The broker was the lead underwriter of the offering of 240 million shares of preferred stock, which raised about 5.9 billion dollars. Liberty Mutual and its subsidiaries state the offering circular from Goldman was false and misleading because it did not outline Freddie Mac’s true capitalization. Freddie Mac was put into conservatorship in September of 2008.
The plaintiffs are Liberty Mutual, Peerless Insurance Company, Safeco Corp., Liberty Life Assurance Company of Boston, and Employers Insurance of Wausau.
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