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Goldman Sachs Group Inc. (GS) and other banks involved in General Electric Co. (GE)’s October 2008, $12 billion secondary offering won dismissal from a securities lawsuit brought by investors who claim they were misled.
U.S. District Judge Denise Cote in Manhattan yesterday threw out the claims the investors had brought under the 1933 U.S. Securities Act, saying that her previous decision in January, denying the defendants’ request to dismiss the claims, had improperly relied on statements that weren’t incorporated in the offering documents for the shares.
The relevant statements, “demand remains strong for GE Capital’s commercial paper debt” and “GE’s funding position is strong and GE has performed well during the recent market volatility,” were made in a Sept. 25, 2008, press release and weren’t incorporated in the prospectus (GE) supplement for the secondary offering, the judge said.
“This ruling disposes of all remaining claims against 42 defendants,” Cote said.
The judge denied a request by Fairfield, Connecticut-based GE and Chief Financial Officer Keith Sherin to dismiss the investors’ claims under the 1934 U.S. Securities Exchange Act, saying the plaintiffs had made plausible allegations based on Sherin’s statements about the quality of GE’s loan portfolio.
The investors, led by State Universities Retirement System of Illinois, provided sufficient support for their claims that Sherin knew his statements weren’t true, she said.
“The second amended complaint has described a plethora of reports which tracked on a regular and detailed basis the quality of the assets to which Sherin’s remarks were directed,” Cote said. “It is highly implausible that GE’s CFO would be ignorant of basic facts contained in these reports about the quality of roughly one-third of GE Capital’s assets.”
GE spokesman Andrew Williams and Joseph Tabacco Jr., a lawyer for the plaintiffs, didn’t immediately return calls to their offices for comment on the ruling after regular business hours.
The case is In re General Electric Co. Securities Litigation, 09-1951, U.S. District Court, Southern District of New York (Manhattan.)
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