NY court dismisses fraud claims vs. Goldman over Abacus CDO


A New York appeals court dismissed a case against Goldman Sachs Group Inc brought by a bond insurer who claimed it was fraudulently induced to insure the bank's Abacus product tied to subprime mortgages.

In a 3-2 decision, New York's Appellate Division, First Department ruled that ACA Financial Guaranty Corp was a "highly sophisticated commercial entity" whose claims of being misled into insuring the collateralized debt obligation, or CDO, were contradicted by the offering disclosure and other evidence.

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ACA claimed Goldman Sachs misled it into believing Paulson & Co, a hedge fund, would take a long position in the Abacus CDO.

The appeals court said ACA could not claim it was relying on the misrepresentations, adding that the insurer could have asked Paulson & Co what position it intended to take.

(Editing by Jan Paschal)