Allstate sues Goldman Sachs over $123 million of RMBS
Allstate Insurance (ALL) sued Goldman Sachs (GS) claiming the investment bank sold the company $123 million in toxic mortgage-backed securities, even though Goldman in its own terms considered the underlying collateral "junk" and "lemons." In a suit filed in a New York state court, the insurance giant said Goldman "made numerous misrepresentations to Allstate regarding the features of the mortgage loans." Allstate accused Goldman of not revealing the toxic and fragile nature of the underlying mortgages. The lawsuit alleges Goldman hid the risk of the securities because "it was able, through the process of securitization, to move the loans off of its books — and off the books of lenders who were indebted to Goldman." A spokesman for Goldman Sachs declined to comment. From April 2006 to March 2007, Allstate purchased $123 million of MBS through five securitizations, relying upon Goldman's analysis of the loans, Allstate alleges in the suit. The insurer is suing the investment bank for common law fraud, fraudulent inducement, negligent misrepresentation and aiding and abetting. Allstate made similar claims against Morgan Stanley (MS) earlier this summer, and has filed several cases against other banks over billions of dollars worth of mortgage-backed securities tainted by alleged toxic collateral. Write to: Kerri Panchuk.