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Goldman Sachs Sued by Capmark to Recover $147 Million

Units of Goldman Sachs Group Inc. were sued by Capmark Financial Group Inc., which accused them of wrongly collecting $147 million five months before Capmark went bankrupt.

While they were co-owners of Capmark in May 2009, a group of Goldman units used their influence to help convince Capmark to refinance $1.5 billion in unsecured debt owed to Goldman, according to the lawsuit filed today in Manhattan federal court. The refinancing allowed Goldman to collect $147 million, including $7 million in cash, based on the new secured loan, according to the lawsuit.

“Despite these conflicts and close connections -- indeed, as a result of the influence and insider status that its multiple simultaneous roles created -- Goldman Sachs actively and directly participated in internal meetings and discussions that led to the secured credit facility, which gave it preferential treatment as a creditor,” Capmark claimed in the lawsuit.

Capmark, the commercial lender once a part of the former General Motors Corp., exited bankruptcy in September, co-owned by lower-ranking creditors, some of whom had fought with Goldman over the refinancing and the payments in bankruptcy court in Delaware.

Michael Duvally, a spokesman for Goldman, declined comment on the lawsuit.

2006 Purchase

Capmark, based in Horsham, Pennsylvania, became partly owned by affiliates of New York-based Goldman Sachs when the bank and a group of investors bought 78 percent of Capmark, then called GMAC Commercial Mortgage, in 2006 for $1.5 billion in cash and the repayment of $7.3 billion of debt.

The creditors committee also battled with Goldman Sachs over how to handle so-called insider preference claims -- lawsuits sometimes brought against company insiders, including equity holders, accused of wrongly taking money from the company in the months before the bankruptcy filing.

“Plaintiffs bring this action seeking avoidance and recovery of all preferential payments made to defendant or for defendants’ benefit under the pre-petition credit facilities,” Capmark said in the complaint filed today.

Last year, U.S. Bankruptcy Judge Christopher Sontchi gave Capmark permission to settle allegations that the entire $1.5 billion refinancing was a fraud on creditors because it wrongly boosted the repayment priority of Goldman Sachs and other lenders.

Under that settlement, Capmark paid New York-based Goldman Sachs and the other lenders about $835 million, less than the full value of the loan.

Capmark filed bankruptcy on Oct. 25, 2009, blaming falling property values and a drop in lending.

The case is Capmark Financial Group Inc. v. Goldman Sachs, 11-CV-7511, Southern District of New York (Manhattan).

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