Is it open season on any securities underwritten by Goldman Sachs (NYSE: GS) that ended up tanking? In the wake of the SEC's suit against Goldman, alleging fraud in how it sold synthetic CDOs to some institutions, we've seen at least one other CDO-related suit emerge. That may have emboldened other aggrieved investors. Liberty Mutual Insurance has just sued the company, charging that it fraudulently sold preferred stock of Fannie Mae that was destined to become "virtually worthless." 

Liberty Mutual wants to be reimbursed for losses on the $62.5 million of Fannie Mae preferred stock it had bought through offerings underwritten by Goldman Sachs, notes Reuters. Liberty charges that Goldman knew of "significant problems" in sub-prime and other risky mortgages in late 2006 and throughout 2007 and generated large profits for itself by betting against the market. It also charges that Goldman falsely stated the offerings were to build excess capital, when in fact Fannie Mae "was severely undercapitalized" and needed capital to remain solvent.

Will this open the floodgates to other buyers of the Fannie offering? It just might. Of course, there are other offerings that also can prompt these sorts of suits. Litigation risk was always a concern with Goldman Sachs.

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