Goldman Sachs sued by German bank alleging firm misled MBS quality
A German bank is suing Goldman Sachs (GS) alleging the investment-banking firm didn't properly disclose the credit quality of mortgage-backed securities bundled in a collateralized debt obligation. Landesbank Baden-Wuerttemberg claims senior executives as Goldman Sachs were reducing exposure to MBS in March 2006, which is when the bank purchased the CDO, 33% of which was subprime and 46% was "midprime," according to a Bloomberg report late Monday. The bank, which eventually lost $37 million on its investment, said Goldman Sachs provided misleading statements and was in breach of duty in its marketing and selling of the notes to its LBBW Luxemborg unit, according to a spokesman for Landesbank Baden-Wuerttenberg. Goldman Sachs spokesman Michael DuVally said the "suit is completely without merit and we will vigorously contest it." Write to Jason Philyaw.