Goldman must pay National Australia US$80 million, panel says

[NEW YORK] Goldman Sachs Group Inc must repay US$80 million with interest that National Australia Bank Ltd invested in a mortgage security before the financial crisis, a Financial Industry Regulatory Authority arbitration panel said.

There were "knowing and material omissions and misstatements" that masked Goldman Sachs's "significant conflict of interest with its clients," the panel wrote in a May 7 ruling, referring to marketing materials for the collateralized debt obligation known as Hudson Mezzanine Funding 2006-1.

Banks continue to face legal costs related to their sales practices for mortgage securities that plunged in value during the 2008 financial crisis. Goldman Sachs's most recent quarterly filing listed National Australia Bank among more than a dozen entities that have brought court complaints or started arbitration proceedings against the firm over sales of mortgage products.

National Australia Bank originally sought US$230 million in compensatory and punitive damages, according to the award notice.

At the hearing, the Melbourne-based lender requested its US$80 million investment and US$60 million in interest. The panel awarded interest at a 3 per cent annual rate going back to December 2006.

Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment on the ruling.

National Australia Bank is pleased with the result, Melbourne-based spokeswoman Meaghan Telford said in an e-mail.

BLOOMBERG