Goldman Sachs to Pay $26 Million to Settle Investor Suit

Goldman Sachs Group Inc. (GS) will pay $26.6 million to settle a lawsuit brought by investors in a $698 million mortgage-backed securities offering, according to papers filed in Manhattan federal court.

The Public Employees’ Retirement System of Mississippi today asked U.S. District Judge Harold Baer to approve the settlement. The pension fund told Baer earlier this month that both sides had accepted a settlement proposed by a mediator. The amount of the settlement was disclosed in today’s filing.

The Mississippi retirement fund sued in 2009, claiming New Century Financial Corp. (CYFL), which originated the mortgages underlying the securities, failed to adhere to its underwriting standards and overstated the value of the collateral backing the loans. The fund claimed New York-based Goldman Sachs didn’t conduct proper due diligence when it bought the loans in 2005.

Baer in February granted a request by the Mississippi fund to represent a class of more than 150 investors in the offering.

The case is Public Employees Retirement System of Mississippi v. Goldman Sachs Group Inc., 09-cv-01110, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net