Bloomberg News

Goldman Sachs Asks New York Court to Dismiss Allstate Suit

October 21, 2011

(Updates with comments from court documents starting in third paragraph.)

Oct. 21 (Bloomberg) -- Goldman Sachs Group Inc. asked a judge in New York state court to dismiss a lawsuit filed by Allstate Insurance Co. over the alleged fraudulent sale of residential mortgage-backed securities.

The Northbrook, Illinois-based insurer sued New York-based Goldman Sachs in New York State Supreme Court in Manhattan on Aug. 15 over the sale of more than $100 million worth of residential mortgage-backed securities, asking for damages including the lost market value of the investments.

Allstate filed the lawsuit and seven similar complaints against various issuers and underwriters of residential mortgage-backed securities, using “generalities and unsupported assumptions” to recoup investment losses on certificates it bought in five offerings in 2006, Goldman Sachs said in court documents filed today.

“Despite its financial sophistication and expertise (including in the housing market, where it is a leading insurer), Allstate now suffers from buyer’s remorse and has sued the counterparties with which it traded at arm’s length, claiming in separate actions that each of the eight sellers of RMBS misled it as to characteristics of the securities,” Goldman Sachs said in the court documents.

Allstate has also sued lenders including JPMorgan Chase & Co., Credit Suisse Group AG, Bank of America Corp.’s Merrill Lynch unit, Citigroup Inc. and Deutsche Bank AG over residential mortgage-backed securities.

The investments, pools of home loans securitized into bonds, were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

The case is Allstate Insurance Co. v. Goldman, Sachs & Co., 652273/2011, New York state Supreme Court (Manhattan).

--Editors: Peter Blumberg, Glenn Holdcraft

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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