NY court dismisses fraud claims vs. Goldman over Abacus CDO

NEW YORK Tue May 14, 2013 12:04pm EDT

A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012. REUTERS/Brendan McDermid

A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - 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 ACAFG.UL 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.

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)