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Goldman Sachs Might Face Class Action Lawsuit Over CDOs
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Shareholders of The Goldman Sachs Group (GS - Free Report) ) have been permitted to go ahead with a class action lawsuit against the company alleging it of making fraudulent claims of prioritizing customer interests over its own, while creating risky subprime securities. These securities included a collateralized debt obligation (CDO) known as Abacus, just prior to the financial crisis era.
U.S. District Judge Paul Crotty has allowed shareholders to sue as a group on lack of evidence from Goldman Sachs to prove that the statements made by it at the time of selling risky products had no impact on its stock price.
Moreover, Crotty noted that a damages model offered by one of the plaintiffs' expert establishes a link between the news of Goldman Sachs' conflicts and the subsequent stock declines.
This is the second time that Crotty has approved shareholders’ request for suing Goldman Sachs with a class action lawsuit. Previously, in September 2015, he had given investors the right to sue as a group, which was later on reversed by a U.S. appeals court, stating need for trial judge to review whether Goldman Sachs’ misrepresentations had affected its market price.
Goldman’s Sachs investors from February 2007 to June 2010, including The Arkansas Teacher Retirement System, claimed to have suffered losses of more than $13 billion due to the company’s misdeeds.
To date, penalties are being imposed on companies over wrongdoings that contributed to the financial crisis. Earlier this month, Wells Fargo (WFC - Free Report) was slapped with a $2.09 billion fine by the U.S. Department of Justice (“DOJ”) accusing it of originating and selling residential mortgage loans, despite having knowledge that these loans contained misstated income information and did not meet the quality that the company represented.
In April 2018, Barclays (BCS - Free Report) agreed to pay $2 billion to the DOJ to resolve allegations over its role in the sale of subprime mortgage and the subsequent financial crisis.
Despite involvements in legal matters, Goldman Sachs’ performance remains solid due to its strong investment banking operations. Further, the company’s efforts to tap new growth opportunities through several strategic investments, including the digital consumer lending platform, will likely support its overall business growth.
The stock has gained 4.9% over the past year compared with the industry’s rally of 13.7%.
Another stock in the same space worth considering is Evercore (EVR - Free Report) . The stock has been witnessing upward estimate revision for current-year earnings over the last 30 days. Also, the company’s shares have rallied 48.6% in the past year. It carries a Zacks Rank of 2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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Goldman Sachs Might Face Class Action Lawsuit Over CDOs
Shareholders of The Goldman Sachs Group (GS - Free Report) ) have been permitted to go ahead with a class action lawsuit against the company alleging it of making fraudulent claims of prioritizing customer interests over its own, while creating risky subprime securities. These securities included a collateralized debt obligation (CDO) known as Abacus, just prior to the financial crisis era.
U.S. District Judge Paul Crotty has allowed shareholders to sue as a group on lack of evidence from Goldman Sachs to prove that the statements made by it at the time of selling risky products had no impact on its stock price.
Moreover, Crotty noted that a damages model offered by one of the plaintiffs' expert establishes a link between the news of Goldman Sachs' conflicts and the subsequent stock declines.
This is the second time that Crotty has approved shareholders’ request for suing Goldman Sachs with a class action lawsuit. Previously, in September 2015, he had given investors the right to sue as a group, which was later on reversed by a U.S. appeals court, stating need for trial judge to review whether Goldman Sachs’ misrepresentations had affected its market price.
Goldman’s Sachs investors from February 2007 to June 2010, including The Arkansas Teacher Retirement System, claimed to have suffered losses of more than $13 billion due to the company’s misdeeds.
To date, penalties are being imposed on companies over wrongdoings that contributed to the financial crisis. Earlier this month, Wells Fargo (WFC - Free Report) was slapped with a $2.09 billion fine by the U.S. Department of Justice (“DOJ”) accusing it of originating and selling residential mortgage loans, despite having knowledge that these loans contained misstated income information and did not meet the quality that the company represented.
In April 2018, Barclays (BCS - Free Report) agreed to pay $2 billion to the DOJ to resolve allegations over its role in the sale of subprime mortgage and the subsequent financial crisis.
Despite involvements in legal matters, Goldman Sachs’ performance remains solid due to its strong investment banking operations. Further, the company’s efforts to tap new growth opportunities through several strategic investments, including the digital consumer lending platform, will likely support its overall business growth.
The stock has gained 4.9% over the past year compared with the industry’s rally of 13.7%.
Currently, Goldman Sachs carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Another stock in the same space worth considering is Evercore (EVR - Free Report) . The stock has been witnessing upward estimate revision for current-year earnings over the last 30 days. Also, the company’s shares have rallied 48.6% in the past year. It carries a Zacks Rank of 2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>