The kind of highly complex credit work ACA didn't do any of.
The most unsympathetic victim of the financial crisis has its lawsuit against Goldman Sachs back! Plucky ACA Financial Guaranty, which had the chutzpah to help Goldman lie about how, exactly, a little CDO called Abacus came to be and then to sue the bank for having dared to lie to it, won its appeal before New York’s highest court yesterday. Basically, the Court of Appeals decided that the burden of proof was all wrong when a lower court dismissed the case: It’s up to Goldman and Paulson & Co. (for whom the CDO was created and which did the actually securities selection that ACA was pretending to do) to show that ACA should have known that Goldman and Paulson were lying when they said Paulson wasn’t shorting the whole damned thing, which of course it was, and not ACA’s job to prove that it had lifted a finger to figure that out. That part’s what expensive jury trials are for.
So, unless Goldman and Paulson can cobble together some conclusive evidence that ACA shouldn’t have just taken them at their word and actually done some of the credit work it was getting paid to do, they’ll have to suffer through a trial which will surely yield the same result. Because, as the dissenting judges on the panel point out, ACA basically kicked its shoes off, threw them up onto their desk and cashed their checks rather than, you know, doing anything.
"Savvy commercial and financial players and inventive lawyers abound in New York," Read wrote. "Our venerable rule ... is designed to make sure that the courts 'reject the claims of plaintiffs who have been so lax in protecting themselves that they cannot fairly ask for the law's protection' and 'may truly be said to have willingly assumed the business risk that the facts may not be as represented' [quoting DDJ Mgt.]."
Fraud Action Reinstated Against Goldman Sachs [New York Law Journal]