Goldman Sachs Group & Co. has tentatively agreed to pay $270 million to settle a putative class action brought by a union pension fund. The investment banking giant was accused of selling $6 billion in shoddy residential mortgage-backed securities (RMBS). Goldman agreed to the settlement that will resolve claims brought by NECA-IBEW Health & Welfare Fund that Goldman defrauded more than 400 investors by giving nearly identical misstatements about the loans underlying each offering.
In March, the pension fund had urged U.S. District Judge Miriam Goldman Cedarbaum to grant class certification, saying the investors bought the securities issued by GS Mortgage Securities Corp. through seven offerings after being misled about the quality of the loans backing the securities. The fund said:
Plaintiff and all other class members assert identical legal theories arising from the same course of conduct by defendants: namely, defendants’ systematic acquisition and securitization of shoddy loans and the offering documents’ misstatements about the loans underlying the certificates.
NECA filed the fourth iteration of its long-running RMBS suit in November 2012. The union pension fund alleged that Goldman, GS Mortgage and three executives gave out registration statements and prospectuses that “contained identical misrepresentations about the quality of the loans and the underwriting of those loans” for several offerings.
NECA sought class certification for both institutional and individual investors who invested in one of seven GSAA Home Equity Trust 2007 offerings. Goldman sold $6 billion worth of certificates in these offerings. The union also asked the judge to appoint it lead Plaintiff and name Robbins Geller Rudman & Dowd LLP as lead counsel in the case. Previous versions of the complaint had been dismissed, but the Second Circuit in September 2012 partially reinstated the proposed class action, finding that NECA alleged a cognizable injury and appropriately represented all potential Plaintiffs who purchased certificates from seven of 17 separate offerings.
Judge Cedarbaum dismissed seven offerings from the suit in July 2014 and struck down NECA’s challenge to the decision in January. Goldman announced in a February regulatory filing that it learned late last year of its involvement in a federal probe into residential mortgage-backed securities and may soon face civil charges as a result. Goldman was among three banks that received final court approval of a $235 million settlement related to mortgage-backed securities reached in February.