Jonathan Stempel

NEW YORK (Reuters) – Goldman Sachs Group Inc (NYSE:) is required to face yet another class action brought by shareholders. They claim that they suffered $13 billion in losses because Wall Street bank created subprime securities and concealed conflicts of interest before 2008’s financial crisis.

U.S. District Judge Paul Crotty of Manhattan dismissed Goldman’s assertion that the general statements it made about its business, such as that clients interests “always come before” and that “integrity and honest are at our core business”, were generic enough to deceive investors and impact its stock price.

Goldman, accused of creating and selling collateralized loans it did not want to fail in order that wealthy clients like John Paulson (hedge fund billionaire) could bet against them. Arkansas Teacher Retirement System shares included.

Goldman refused to comment. The shareholders’ lawyers did not respond immediately to inquiries for comment.

It was appealed to the U.S. Supreme Court. The Supreme Court ruled in June that lower courts may use expert testimony and “a good amount of common sense” to determine whether generic statements affect stock prices.

Crotty applied that decision and stated that even Goldman’s most generic statements could increase misinformation regarding its practices. He also said that Goldman did not offer any evidence to support the claim that Goldman stock prices would have “held firm” if they had disclosed their conflicts.

Crotty noted Goldman’s assertion that many blue-chip firms make similar statements and said he couldn’t understand how such statements could be so ubiquitous if they didn’t have an effect on stock market prices.

Crotty stated that Goldman’s defendants must “show, by a preponderance of the evidence, that the alleged false statements had no price effect whatsoever.” The burden of proof has been carried by the defendants.

The Supreme Court ruled that investors can rely upon the presumption of all publicly available information regarding a company being reflected in stock prices.

Goldman agreed to a $550m settlement with U.S. Securities and Exchange Commission in 2010. This resolved U.S. Securities and Exchange Commission allegations that Goldman concealed Paulson’s participation in the creation of a CDO (Abacus 2007-AC1) and that he had made $1billion betting against it.

This case is called In re Goldman Sachs Group Inc Securities Litigation. U.S. District Court Southern District of New York. 10-03461.