CDO Lawsuit Against Goldman Gets Green Light

The ""Goldman Sachs Group Inc."":http://www.goldmansachs.com/ has officially lost its bid to dismiss a securities class action lawsuit brought by ""Dodona I, LLC"":securities.stanford.edu/1045/...01/2010127_f02oc_10CV07497.pdf, over claims that the company misrepresented a $2 billion offering of collateralized debt obligations (CDOs).

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""U.S. District Judge Victor Marrero"":nysd.uscourts.gov/judge/Marrero rescinded Goldman's move to have the case dismissed, and Dodona will now continue to pursue its legal proceedings against the company in federal court.

Dodona's allegations stem from a package of residential mortgage-backed securities (RMBS) that Goldman offered to investors, and the suit claims that Goldman deceptively sold sub-prime mortgage assets within the securities that

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progressively failed. Specifically, Dodona filed its lawsuit over Hudson Mezzanine Funding 2006-I and 2006-2 CDOs.

Additional legal issues attached to the case include Dodona's accusation that Goldman provided materially misleading statements to investors related to the value of the instrument in question. The case, which was filed in New York's federal court, notes that Dodona believes that Goldman had full knowledge regarding the likely failure of the RMBS included in the CDOs during the period when the company was advising participants as to the quality of the investments.

Goldman is currently facing several lawsuits related to its RMBS offerings. Most recently, Goldman settled a case for $550 million over allegations that it failed to disclose the role of a participating hedge fund while compiling its CDOs; within that lawsuit, the company was also accused of taking a short position against its own securities offerings, later betting on their poor performance in the open market.

According to ""Reuters"":www.reuters.com/ and multiple press outlets, the ""U.S. Securities and Exchange Commission"":www.sec.gov/ is continuing to enhance its investigation into various Wall Street firms who sold CDOs before and during the financial crisis. The ""Zacks Analyst Blog"":http://www.zacks.com/ stated earlier in the month that, in addition to Goldman's legal problems, ""Citigroup Inc."":www.citigroup.com/, ""JPMorgan Chase & Co."":www.jpmorganchase.com/, ""HSBC Holdings Plc"":www.hsbc.com/, and ""M&T Bank Corp."":www.mtb.com/ are also facing accusations of misrepresenting mortgage-backed and other types of securities.