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Goldman Sachs to repay $80m to National Australia Bank

Goldman Sachs will have to pay $80m with interest to the National Australia Bank (NAB) which invested in a mortgage security before the financial crisis.


The decision was taken by Financial Industry Regulatory Authority (Finra) arbitration panel.

NAB filed a $230m arbitration claim in 2012 alleging that Goldman Sachs had violated the mortage-linked security practices of industry sales that later soured which contributed to the list of legal skirmishes that the Wall Street firm had to face after the financial crisis, the Wall Street Journal reported.

In its claim, NAB had argued for $230m in total damages including $80m as compensatory damages with interest of $60m and punitive damages.

NAB had invested $80m in Hudson Mezzanine Funding 2006-1, a Goldman collateralised-debt obligation in 2006.

However, a US Senate report found in 2011 that although Goldman was pitching Hudson securities to investors, it was also betting against their value.

The Finra panel said that the claim was the result of a mortgage-related deal which carried ‘a significant conflict of interest’ between Goldman Sachs and its clients, according to The Australian.

NAB was represented by law firm Quinn Emanuel Urquhart & Sullivan on the case.

Speaking about the case, the lead attorney Jonathan Pickhardt said: "We are happy with the result because the $100m 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."

Goldman earlier paid $550m to settle allegations by Securities and Exchange Commission of misleading investors in the sale of another collateralised-debt obligation.

Image: In its claim against Goldman Sachs, NAB had argued for $230m in total damages including $80m as compensatory damages. Photo: courtesy of Bidgee via Wikipedia.