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Goldman Sachs Ordered to Pay Australian Bank $100 Million for MBS ‘Conflict of Interest’

jar-of-cashGoldman Sachs has been ordered by arbitrators to pay approximately $100 million to National Australia Bank (NAB) for a "conflict of interest" regarding mortgage-backed securities sales in the run-up to the mortgage meltdown, according to media reports.

NAB filed a claim against Goldman Sachs for $230 million in December 2012, alleging that the New York-based investment banking firm had violated industry practices regarding its sales of mortgage-backed securities. According to the Wall Street Journal, NAB was seeking $80 million in compensatory damages, $60 million in interest, and punitive damages.

Arbitrators from the Financial Industry Regulatory Authority (FINRA) awarded the $80 million compensatory request to NAB plus interest amounting to approximately $20 million, according to reports, bringing the total amount Goldman was ordered to pay up to approximately $100 million.

"We are happy with the result because the $100 million award compensates NAB for its losses with interest and also sends the clear message that it is not okay to conceal conflicts of interest from clients," said attorney Jonathan Pickhardt from Quinn Emanuel, representing NAB in the case, in a statement when contacted by DS News.

A spokesperson from Goldman Sachs did not immediately respond to a request for comment.

Quinn Emanuel said that NAB invested $80 million in a collateralized-debt obligation (CDO) named Hudson Mezzanine Funding 2006-1 in 2006. Five years later in 2011, the U.S. Senate reported that Goldman did not disclose that it was betting against the value of the Hudson CDO pool while it was trying to convince investors to bet for it. NAB's attorneys said the bank lost its $80 million investment in the Hudson pool while Goldman collected a profit. The panel of arbitrators said Goldman had engaged in "a significant conflict of interest" by failing to disclose to investors that it had was betting against the Hudson CDO pool.

It has been a tough week for Goldman Sachs in the legal department. Last week, the New York State Court of Appeals revived a $120 million lawsuit originally filed by ACA Financial Guaranty Corp accusing Goldman of CDO fraud. The suit had been dismissed by the Appellate Division of the New York Supreme Court two years ago.

Goldman agreed to a settlement worth $550 million in 2010 with the U.S. Securities and Exchange Commission over claims of defrauding Abacus investors. As part of the settlement, Goldman did not admit any wrongdoing.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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