April 19, 2010 / 3:19 PM / 9 years ago

Rabo points to Goldman charges in Merrill suit

* Rabo lawyer says Merrill did “precisely” same as Goldman

* Original suit seeks $45 mln for lost CDO investment * Merrill Lynch says claims unrelated

AMSTERDAM, April 19 (Reuters) - Rabobank [RABO.UL] has told a New York judge that civil fraud charges against Goldman Sachs (GS.N) bolster the Dutch bank’s own suit against Merrill Lynch for allegedly committing the same kind of securities fraud.

The U.S. Securities and Exchange Commission charged Goldman last Friday, alleging Wall Street’s most powerful bank structured and marketed a collateralized debt obligation (CDO) without telling investors “vital information” about the product.

“Rabobank has alleged that Merrill Lynch engaged in precisely the same type of fraudulent conduct in the structuring and marketing” of a disputed CDO as Goldman, Rabobank attorney Jonathan Pickhardt said in a letter on Friday to the judge hearing the case.

Rabobank provided a copy of the letter on Monday.

Merrill Lynch, now owned by Bank of America (BAC.N), strongly denied Rabobank’s claims.

“The two matters are unrelated and the claims being made now are not only unfounded but weren’t included in the Rabobank lawsuit filed nearly a year ago,” Merrill Lynch spokesman Bill Haldin said in a statement.

“Merrill Lynch provided every piece of information requested and that was required by Rabobank in making its decision to lend, including descriptions of the underlying collateral.”

Rabobank sued Merrill Lynch in New York state court last June, claiming that Merrill misled it into lending money to a CDO called “Norma” that ultimately defaulted. Rabo lost $45 million in the default, which it said Merrill knew would happen given the CDO’s poor quality.

The suit also alleged that the securities in the CDO were not independently selected, and were in fact structured in such a way as to offload bad assets from Merrill’s books and benefit hedge funds that were planning to short the instrument.

The allegation about CDO’s not being structured independently is also at the heart of the Goldman complaint.

Merrill filed an extensive motion to dismiss the suit last August, arguing among other things that Rabobank had confirmed in writing it made its own independent decision to enter into the transaction and fully understood the risks. (Reporting by Ben Berkowitz, additional reporting by Douwe Miedema in London; Editing by Andrew Callus)

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