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Merrill Used Same Alleged Fraud as Goldman, Bank Says (Update1) - Bloomberg.com

April 17 (Bloomberg) -- Merrill Lynch & Co. engaged in the same investor fraud that the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of committing, according to a bank that sued the firm in New York last year.

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, known as Rabobank, claims Merrill, now a unit of Bank of America Corp., failed to tell it a key fact in advising on a synthetic collateralized debt obligation. Omitted was Merrill's relationship with another client betting against the investment, which resulted in a loss of $45 million, Rabobank claims.

Merrill's handling of the CDO, a security tied to the performance of subprime residential mortgage-backed securities, mirrors Goldman Sachs conduct that the SEC details in the civil complaint the agency filed yesterday. It claimed Goldman omitted the same key fact about a financial product tied to subprime mortgages as the U.S. housing market was starting to falter.

"This is the tip of the iceberg in regard to Goldman Sachs and certain other banks who were stacking the deck against CDO investors," said Jon Pickhardt, an attorney with Quinn Emanuel Urquhart Oliver & Hedges, who is representing Netherlands-based Rabobank.



The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Sun Apr 18th, 2010 at 12:08:39 PM EST
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