Goldman Sachs is Sued by Liberty Mutual for Securities Fraud

Goldman Sachs & Company has been sued by Liberty Mutual Insurance Company and others for misleading them with regard to their purchase of a preferred stock offering for Federal Home Loan Mortgage Corporation (Freddie Mac) in 2007, according to It should be noted that Goldman was the lead underwriter of the offering of 240 million shares of preferred stock that raised approximately $5.9 billion.

According to the report, Liberty Mutual made a $37.5 million investment in the offering, which is now worthless. The claim is based on the fact that Goldman “knew or recklessly ignored the fact that Freddie Mac did not meet its regulatory capital requirements” and that the corporation chartered by Congress for market liquidity purposes “remained severely undercapitalized even after the sale of the preferred stock.” The complaint alleges that Goldman “had taken a net short position on other securities backed by subprime residential mortgages that generated $3.7 billion in profits for the firm in 2007 alone.”The article goes on to say that Goldman’s illegal and deceptive practices have been well documented in the U.S. Senate subcommittee report discussing the part that Wall Street firms played in the financial crisis of 2008.

Liberty Mutual along with Peerless Insurance, Safeco, Liberty Life and Employers Insurance Company of Wausau say that the offering materials distributed by Goldman were “false and misleading” because they failed to depict Freddie Mac’s true capitalization in late 2007. In September 2008, Freddie Mac was placed in conservatorship. The court documents reveal that the insurance companies are requesting damages of more than $100 million.

If you or your company has suffered losses in this preferred stock offering, please contact our securities law firm for a confidential consultation at 1-800-259-9010.

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