Aussie Goldman clients may sue for $15m

GOLDMAN Sachs in Australia faces a potential $15 million lawsuit by former clients who have claimed the investment bank misrepresented complicated derivatives contracts that forced them to buy bluechip stocks at over-the-market odds.

Law firm Slater & Gordon said yesterday it was investigating allegations of misleading and deceptive conduct against Goldman Sachs JBWere Capital Markets, The Australian reports.

The investigation surrounds the Goldman Sachs-designed “buy below the market” options contract sold to the bank’s wholesale clients in 2007.

Slater & Gordon’s practice group leader, Van Moulis, said clients had approached the law firm and claimed they were sold the contracts as a protection against a sudden downturn in the equities market.

It was claimed the product was marketed as similar to an “American call option”, but Mr Moulis said it was a rolling futures contract. Attempts at mediation with Goldman Sachs had been unsuccessful.

“It’s a derivative-based product that was marketed and described by the bank as an option,” Mr Moulis said.

“But when you read the fine print it’s a futures contract which locks the client into buying the underlying stock at a certain strike price.

“When the market plunged, the clients were told they were obliged to buy the stock at the higher strike price.

“This particular product was marketed widely across the Goldman Sachs client base.

“It was a home-grown product.”

The potential Slater & Gordon case, which has not yet been filed in court, follows similar action against Goldman Sachs that has been taken by the former chief executive of Merrill Lynch in Australia, Greg Bundy.

Goldman Sachs in Australia refused to comment.