Sachs"), alleges as follows: breaches of fiduciary duty and negligent ...

Case 3:10-cv-01247-FLW -LHG Document 1 Filed 03/09/10 Page 1 of 21 

UNITED STATES DISTRICT COURT 

DISTRICT OF NEW JERSEY 

JEROME GOODMAN, 

-against- 

Plaintiff, 

THE GOLDMAN SACHS GROUP, INC., 

Defendant. 

X 

X 

Index No. 

COMPLAINT 

Jury 

Trial Demanded 

Plaintiff Jerome Goodman ("Plaintiff, "Goodman" or "Jerry Goodman"), 

Complaint against Defendant The Goldman Sachs Group, Inc. ("Defendant" 

Sachs"), alleges 

as follows: 

NATURE OF THE ACTION 

as and for his 

or "Goldman 

1. Jeny Goodman brings this action for damages resulting from Goldman Sachs' 

breaches of fiduciary duty and negligent misrepresentations to Jeny Goodman, which Goldman 

Sachs committed recklessly, for its own pecuniary gain. 

2. Working in conjunction with its wholly-owned subsidiary, The Ayco Company, 

L.P. ("Ayco"), Goldman Sachs served as a financial advisor to Jeny Goodman from 

approximately spring 2004 through December 2008. 

3. In that capacity, Goldman Sachs owed Jeny Goodman a fiduciary duty 

to act with 

reasonable skill and care in performing its responsibilities as well as a duty of loyalty to act in 

Goodman's interests.


4. As set forth more fully below, Goldman Sachs breached its fiduciary duty to Jerry 

Goodman and made negligent misrepresentations to Goodman and members of the Goodman 

Family, proximately causing Goodman to suffer more than $15 million in damages.' 

First, Goldman Sachs breached its fiduciary duty to Jerry Goodman by meeting 

with the Goodman Family in spring 2004 and providing explicit, written investment advice 

concerning the asset allocations in Jerry Goodman's portfolio without first creating 

a client 

profile for Jerry Goodman, taking account of Goodman's needs, life circumstances, personal 

investment objectives and risk tolerance. 

6. Financial advisors are required by law and applicable regulation to "know their 

client" before providing investment advice, and Goldman Sachs was subject to this obligation, 

which it breached. 

7. Irrespective of the investment advice actually dispensed by Goldman Sachs, 

Goldman Sachs committed a breach of duty because it never obtained or analyzed the 

information necessary to provide investment advice to Jerry Goodman in a manner consistent 

with its regulatory and fiduciary obligations. 

8. Second, the oral and written investment advice that Goldman Sachs provided to 

Jerry Goodman was reckless and unsuitable for Jerry Goodman, causing Goodman to sustain 

millions of dollars in damages. 

9. Specifically, at the time Goldman Sachs first met with the Goodman Family in or 

about the spring of 2004, Jerry Goodman had approximately 70% of Goodman's investable 

assets, totaling approximately $12 million, allocated to a single investment, Bernard L. Madoff 

Investment Securities, LLC (the "Madoff Fund"). This highly risky asset allocation had been 

I References to the "Goodman Family" or the "Goodmans" are primarily intended to include Jerry Goodman and/or 

Jerry Goodman's son, Kevin Goodman, who served as an additional point of contact between Goldman Sachs and 

Jerry Goodman. 

496741-1 

2


implemented and overseen by Goldman Sachs' wholly-owned subsidiary, The Ayco Company, 

L.P., which had served as Goodman's financial advisor since approximately 1998. 

10. Goldman Sachs had actual knowledge of Jerry Goodman's over-concentrated and 

highly risky portfolio prior to meeting with the Goodman Family in spring 

2004 because 

Goldman Sachs had obtained and analyzed detailed factual information from Ayco concerning 

each of Jerry Goodman's investments, including his investment in the Madoff Fund. 

11. Despite having actual knowledge of Goodman's over-concentrated and highly 

risky portfolio, Goldman Sachs failed to warn Jerry Goodman that his portfolio was dangerously 

over-concentrated in a single investment, and did not recommend (much less insist, as it should 

have) that Jerry Goodman diversify his over-concentrated and highly risky portfolio 

broad range of suitable asset classes. 

12. Likewise, Goldman Sachs did not create, or review with Jerry Goodman, 

across a 

diversified, custom-designed portfolios reflecting varying volatility and performance levels 

suited to Jerry Goodman's individual needs, life circumstances, investment objectives and risk 

tolerance. 

13. Nor did Goldman Sachs actually implement or actively 

portfolio for Jerry Goodman, as it was required to do. 

maintain a diversified 

14. Goldman Sachs also failed to warn Jerry Goodman that Goldman Sachs had, upon 

information and belief, banned its own asset managers from investing any client money with the 

Madoff Fund. 

15. Upon information and belief, Goldman Sachs implemented an internal ban on 

investment with the Madoff Fund in or around 1999, after Goldman Sachs conducted or 

attempted to conduct satisfactory due diligence 

496741-1 

into the Madoff Fund.


16. To the contrary, in written materials, and orally, Goldman Sachs advised Jerry 

Goodman to preserve approximately $7 million of his existing investment in the Madoff Fund, 

an allocation that represented over 40% of Goodman's investable portfolio. 

17. The Goldman Sachs' written proposal to Jerry Goodman consisted of the 

recommendation that Jerry Goodman transfer the balance of his existing approximately $12 

million Madoff Fund investment, or approximately $5 million, into Goldman Sachs hedge funds, 

advice that if executed would have generated lucrative revenue for Goldman Sachs. 2 

18. Even the recommendation to transfer $5 million out of the Madoff Fund was not a 

recommendation to transfer that amount to a different asset class such as bonds or other fixed 

income products, thereby diversifying Jerry Goodman's portfolio. Rather, Goldman Sachs 

advised Jerry Goodman to transfer $5 million to unsuitable replacement hedge funds within the 

same "alternative investment" category. 

19. In short, instead of recommending and implementing a diversified portfolio for 

Jerry Goodman consistent with its fiduciary obligation (or, at a minimum, advising Goodman to 

liquidate his existing, risky over-concentrated position) Goldman Sachs took the opportunity of 

meeting with the Goodman Family to peddle its fee-generating investment products for its own 

financial gain, without regard for Jerry Goodman's needs and objectives. 

20. In written materials and orally, Goldman Sachs' investment advice to Jerry 

Goodman was that he preserve a $12 million asset allocation to a category denominated by 

2 Goldman Sachs' written recommendations related to a family limited partnership known as Goodman Capital 

Partners, L.P. ("GCP") (which also had money invested in the Madoff Fund) in addition to Jerry Goodman 

personally. To the extent any of Goldman Sachs' recommendations related in part to GCP, Jerry Goodman's 

allegations are based, in every instance, upon the assumption most favorable to Goldman Sachs. Thus, for example, 

Jerry Goodman assumes that the recommendation to transfer $5 million out of the Madoff Fund would have come 

entirely from Jerry Goodman's account, leaving him with "only" a 40% allocation to the Madoff Fund. 

496741-1 

4


Goldman Sachs in written materials as "alternative investments, an allocation of over 70% of 

his investment portfolio. 

21. This advice was unsuitable and inappropriate for a man of Jerry Goodman's age, 

life circumstances and investment objectives, and it was motivated by Goldman Sachs' own 

pecuniary interest. 

22. Goldman Sachs' written investment recommendation which stamped the 

patently unsuitable 70% asset allocation to the category of "alternative investments" with 

Goldman Sachs' express approval reinforced Jerry Goodman's mistaken belief that his money 

had been safely and suitably invested by Ayco, in a manner appropriate for a man of his 

advanced age, and individual needs and objectives. 

23. Had Goldman Sachs, consistent with its fiduciary duty, advised Jerry Goodman 

that his over-concentrated portfolio was highly risky and unstable let alone that the specific 

investment to which the vast majority of Goodman's money was allocated (i.e., the Madoff 

Fund) had been banned internally by Goldman Sachs itself Goodman would have liquidated his 

investment in the Madoff Fund and insisted on the creation of a truly diversified portfolio suited 

to his investment objectives and risk tolerance. 

24. Goldman Sachs failed to warn Jerry Goodman of the known hazards threatening 

his portfolio, and made no attempt to satisfy its duty to create, implement and maintain a true, 

diversified portfolio for Jerry Goodman.3 

25. The self-serving motivation for Goldman Sachs' conduct is evident: Goldman 

Sachs treated the Goodman Family as a sales "mark, abusing its position of trust and confidence 

3 

Ultimately, Goldman Sachs permitted up to 87% ofJerry Goodman's liquid assets, totaling $15, 145,215.80, to 

become concentrated in the Madoff Fund, without objection, as of September 30, 2008. 

496741-1 

5


vis-à-vis the Goodman Family, and exploiting the Goldman Sachs name and reputation to push 

Goldman Sachs investment products for its own financial gain.4 

26. When the Madoff Fund collapsed in December 2008, Jerry Goodman's life 

savings were lost. Had Goldman Sachs warned Goodman of the known dangers threatening his 

over-concentrated and highly risky portfolio and advised Goodman to divest from the Madoff 

Fund and develop a diversified portfolio suitable to his individual circumstances either in 2004 

or thereafter, Goodman's massive loss would have been averted. 

27. Additionally, through Ayco, which had actual and/or apparent authority to speak 

on Goldman Sachs' behalf, Goldman Sachs provided express but false written and oral 

assurances to the Goodman Family that Goodman's investment in the Madoff Fund was insured 

for its full face value (i.e., beyond the $500,000 limit of federal SIPC insurance). 

28. Goldman Sachs' false representations concerning insurance for Jerry Goodman's 

investment in the Madoff Fund were made in direct response to queries by the Goodman Family 

regarding the safety of the Madoff Fund, and in response to explicit requests by the Goodman 

Family for assistance in diversifying Jerry Goodman's portfolio to protect against the risk ofloss 

associated with over-concentration in a single investment, which the Goodman Family had by 

then begun to understand, as the nationwide financial crisis took root in late 2007 and early 2008. 

29. Goldman Sachs' false representations reassured Jerry Goodman regarding the 

security of his investment in the Madoff Fund, and directly caused him not to liquidate that 

investment, proximately causing injury to Jerry Goodman in an amount exceeding $15 million. 

Indeed, from a diversification perspective, the only difference between the over-concentrated and risky portfolio 

maintained by Ayco, which was already in place when Goldman Sachs met with the Goodman Family in 2004, and 

the portfolio that Goldman Sachs proposed for Goodman, was that the "recommended" portfolio would have 

substantial revenue for Goldman Sachs. 

generated 

496741-1 

6


30. Goldman Sachs' self-serving misconduct subjected Jerry Goodman to a 

foreseeable risk of significant harm well known to members of the financial services industry, 

specifically, the risk of overall financial devastation based on the failure of a single investment or 

asset class.5 

31. The regulatory and legal obligation incumbent on a financial advisor to diversify 

client assets across asset classes exists specifically to protect against this known hazard, and the 

self-serving misconduct committed by Goldman Sachs poses a grave threat to the entire 

investing public. 

32. Jerry Goodman has suffered millions of dollars in injury as a direct and proximate 

result of Goldman Sachs' misconduct, and he is entitled to redress. 

PARTIES 

33. Jerry Goodman is a 69 year old retiree who lives with his wife Joan. Goodman 

founded and ran a collection agency on Long Island for over 25 years. Goodman has never been 

a sophisticated investor and has never routinely made direct investments in the public securities 

markets on his own. Goodman resides at 38 Millbrook Stillwater Road, Hardwick, New Jersey. 

34. The Goldman Sachs Group, Inc. is a corporation organized and existing under the 

laws of the State of Delaware with its principal place of business at 85 Broad Street, New York, 

New York. According to its promotional materials, Goldman Sachs is a global financial services 

firm that provides investment banking, securities and investment management services to 

corporations, financial institutions, governments and high-net-worth individuals. Through its 

5 To be clear, Jerry Goodman's claim is not based on Bernard Madoff's Ponzi scheme. It is based on Goldman 

Sachs' breach of duty in failing to advise, much less insist, that Jerry Goodman divest from the dangerously overconcentrated 

portfolio that Ayco had maintained for him and diversify his assets across asset categories. To put 

Goodman's claim in further perspective, if Goldman Sachs had permitted 87% of Goodman's liquid assets to 

become concentrated in any one ofthe countless public companies that failed in 2008, including Bear Stearns, 

Lehman Brothers, Fannie Mae or Freddie Mac, Goodman would have suffered similar losses and Goldman Sachs 

would now be equally liable. 

496741-1 

7


Global Investment Strategies group, Goldman advises clients in "strategic asset allocation, 

liability-driven investing and active risk budgeting 

JURISDICTION AND VENUE 

35. Diversity jurisdiction exists pursuant to 28 U.S.C. 1332(a) because Plaintiff is a 

resident ofNew Jersey and Defendant is a resident of Delaware and New York. The amount in 

controversy exceeds $75,000.00, exclusive of interest and costs. 

36. Defendant is subject to general personal jurisdiction in New Jersey. 

37. Venue is proper in this District pursuant to U.S.C. 1391(a) because Plaintiff 

resides in this District and events and omissions giving rise to Plaintiff's claims occurred in this 

District. 

FACTUAL ALLEGATIONS 

A. The History Of Jerry Goodman's Account 

38. In 1997, Jerry Goodman, then 57 years old, sold North Shore Agency, Inc. (the 

"Agency"), a collection agency he founded in 1971 and ran on Long Island for over 25 years. 

The purchase price was approximately $20 million. 

39. The proceeds of the sale represented virtually all of Jerry Goodman's net worth. 

40. Goodman's goal in selling the Agency was to secure a "nest egg" to ensure a safe 

future for himself, his wife Joan (then 43), and his three children, Kevin, Peter and Abbey (then 

33, 28 and 20, respectively). 

41. Prior to selling the Agency, Goodman did not routinely invest in public securities, 

and was not a sophisticated investor. 

496741-1 

8


42. Upon selling the Agency, Goodman recognized that he would need the guidance 

and advice of a professional financial advisory firm to invest his money in such a manner as to 

generate enough income to live on, and to protect his principal. 

principal. 

43. At all times, Jerry Goodman's main investment objective was the protection of his 

B. Jerry Goodman's Account Is Massively Over- 

Concentrated In The Madoff Fund 

44. In or around 1998, Goodman selected The Ayco Company, L.P. ("Ayco"), now a 

wholly-owned subsidiary of Goldman Sachs, to serve as his registered financial advisor. 

45. Ayco's primary responsibility was to create and implement a suitable, diversified 

investment model that would meet Goodman's cash needs while protecting his principal, 

inflation-adjusted basis. 

46. Ayco did not, either at the inception of its relationship with Jerry Goodman, or 

thereafter, create a legitimate client profile for Jerry Goodman, ascertaining Goodman's life 

circumstances, investment objectives or risk tolerance so that it could invest his money in a 

manner consistent with his individual needs. 

47. Ayco also failed to present Jerry Goodman with meaningful, alternative asset 

allocation models reflecting different potential returns and volatility levels, or to create, 

implement and maintain a true, diversified investment portfolio 

for Goodman. 

on an 

48. Instead, Ayco "parked" increasing percentages of Jerry Goodman's liquid assets 

in the Madoff Fund, and rested on its laurels, drawing outsized management fees without 

providing the services it was paid to provide. 

49. At the same time, Ayco intentionally 

led Goodman to believe that it was 

performing appropriate risk-protection and investment allocation services for Goodman, which it 

496741-1 

9


was not, and reinforced Goodman's mistaken perception that his money was professionally 

managed and secure. 

50. Under Ayco's management, Jerry Goodman's portfolio allocation to the Madoff 

Fund ballooned from approximately $4 million in 1998, to approximately $12 million in 2004, at 

or around the time at which Goldman Sachs began working on the Goodman account. By 

September 2008, the portfolio allocation to the Madoff Fund exceeded $15 million. 6 

51. These figures represent approximately 26%, 70% and 87% of Jerry Goodman's 

liquid assets, respectively.7 

C. Goldman Sachs Acquires Ayco, Begins Work On Jerry Goodman's 

Account And Breaches Its Duties To Jerry Goodman 

52. In or around 2003, Goldman Sachs acquired a 100% interest in Ayco. 

53. Thereafter, all Ayco letterhead and Ayco-Goodman yearly engagement letters 

bore an enlarged legend at the top of the front page identifying Ayco 

Company." 

as "a Goldman Sachs 

54. In or around late 2003 or early 2004, Ayco advisors, including Larry Abrahams 

("Abrahams"), contacted the Goodman Family for the purpose of assuring Jerry Goodman that 

Ayco's acquisition by Goldman Sachs would benefit Goodman and his family, and to persuade 

Goodman that he should keep his account at Ayco and not move his money elsewhere. 

55. To bolster their pitch, Abrahams and other Ayco representatives expressly stated 

to the Goodmans, both orally and in writing, that Goldman Sachs would begin working in 

6 Goodman opened a direct account with Madoff in or around early 1998 and made his first investment in Madoff in 

or about March 1998. 

7 

Dollar and percentage estimates in this Complaint are derived from an account reconstruction performed by Jerry 

Goodman's forensic accountants, the Marcum Group LLP. All amounts reflect Goodman's best efforts to calculate 

accurate amounts. As Goodman will show at trial, Ayco failed to maintain accurate and comprehensive financial 

records for him, in breach of its contractual record-keeping obligation, and in fact provided almost no information 

for the years 1998 through 2001. 

496741-1 

10


tandem with Ayco to provide financial advisory services and investment advice to Jerry 

Goodman. 

56. Abrahams and others at Ayco expressly represented to the Goodmans, orally and 

in writing, that Goodman would have the benefit of the expertise of Goldman Sachs' world class 

asset managers and that Goldman Sachs asset managers would analyze Jerry Goodman's existing 

investment allocations, and his portfolio going forward, thereby adding value to the management 

of his portfolio. 

57. Specific communications from Ayco concerning the services Goldman Sachs 

would provide to Goodman and his family include, but are not limited to an email, dated January 

28, 2004, from Abrahams to Kevin Goodman, as follows: 

GS is giving us a platform in terms of investment recommendations and managing 

client portfolios that we never had. In the past Tim [O'Hara] made 

recommendations such as PCM, MetWest, Ramius, that were from the Ayco 

approved list. We now have access to two things we never had before at Ayco: a 

huge choice of hedge funds for clients and investment professionals to 

supplement what we do at Ayco. While I certainly can make recommendations 

from my approved list of funds.. your family will be better served by bringing 

someone to supplement me. The focus of the meeting would be: what is their 

value added as it relates to Madoff substitutes 

I'll forward the QPRT 

(Emphases supplied; errors in original.) 

memo to JG. 

58. In or around early 2004, Abrahams solicited permission from the Goodman 

Family to provide to Goldman Sachs confidential information concerning each of Jerry 

Goodman's specific holdings, and the performance of each of Jerry Goodman's investments, 

which, Abrahams stated, Goldman Sachs required in order to function effectively as Jerry 

Goodman's financial advisor. 

496741-1 

11


59. Having been told that Goldman Sachs would be working together with Abrahams 

and others at Ayco to manage his account, the Goodman Family authorized Ayco to share all 

such confidential information with Goldman Sachs. 

60. The information that Ayco provided to Goldman Sachs for the purpose of 

facilitating Goldman Sachs' work on the Goodman account reflected the fact that, as of spring 

2004, Ayco had allocated approximately $12 million from Jerry Goodman's portfolio, or 

approximately 70% of Goodman's liquid assets, to the Madoff Fund. 

61. In or around early 2004, Abrahams informed the Goodmans that Goldman Sachs 

asset managers were working on their initial review of Jerry Goodman's existing portfolio, and 

would provide a set of initial allocation recommendations shortly. 

62. In or around early 2004, Abrahams informed the Goodman Family that Goldman 

Sachs had completed the planned review of Jerry Goodman's account and had sent its 

recommendations to Ayco. 

63. Abrahams informed the Goodman Family that Goldman Sachs' managers wanted 

to meet with the Goodman Family in person in order to strengthen the relationship between 

Goldman Sachs' and the Goodman Family, whom Goldman Sachs would be working with going 

forward. 

64. In or around spring 2004, Abrahams and Goldman Sachs executives, including 

Christopher Duda ("Duda"), a Vice President in the Private Wealth Management group of 

Goldman Sachs' Investment Management Division, contacted the Goodman Family to schedule 

a meeting to review Jerry Goodman's portfolio and to present Goldman Sachs' investment 

advice. 

65. In or around May 2004, Duda met with Kevin Goodman at the Seven Seas diner, 

in Great Neck, New York. Duda reiterated that Goldman Sachs had reviewed Jerry Goodman's 

496741-1 

12


confidential financial information with Ayco and had developed recommendations for Jerry 

Goodman's portfolio. 

66. Inexplicably, given the internal ban that Goldman Sachs had, upon information 

and belief, placed on investment with the MadoffFund, Goldman Sachs' "recommendations" did 

not include a warning that Goldman Sachs had prohibited its own asset managers from investing 

client money in the Madoff Fund, or advice (much less insistence) that Goodman exit the Madoff 

Fund. 

67. To the contrary, Goldman Sachs' written presentation advised Goodman to keep 

at least $7 million, representing approximately 40% of Goodman's overall portfolio, in the 

Madoff Fund. Goldman Sachs' written recommendations advised Goodman to transfer the 

balance of his Madoff allocation, or approximately $5 million, into Goldman Sachs hedge funds 

a "recommendation" that would generate lucrative revenue for Goldman Sachs without 

eliminating any risk from an allocation standpoint for Jerry Goodman. 

portfolio 

68. Ultimately, Goldman Sachs did not advise Jerry Goodman to diversify his 

or to transfer assets into secure investments such as bonds or other fixed income 

products, in order to reduce risk. Rather, Goldman Sachs advised Jerry Goodman to transfer a 

total of $5 million into three different Goldman Sachs-run funds that, by Goldman Sachs' own 

written description, were part ofthe same "alternative investments" category as the Madoff 

Fund. 

69. Thus, putting aside Goldman Sachs' failure to warn Jerry Goodman, on 

information and belief, about Goldman Sachs' own ban on investment with the Madoff Fund, 

Goldman Sachs failed to warn the Goodman Family, either at the May 2004 meeting or 

thereafter, that Jerry Goodman's portfolio was dangerously over-concentrated in a single 

496741-1 

13


investment and asset class, or to recommend (much less insist) that Jerry Goodman meaningfully 

diversify his over-concentrated portfolio by spreading his assets across asset classes. 

70. A portfolio created by a prudent financial advisor for an investor of Jerry 

Goodman's age, net worth and life circumstances, should have included a substantial allocation 

to bonds and/or other fixed income products, including treasury and agency bonds, tax-free 

municipal bonds and annuities, of up to 75%, and Goldman Sachs' failure to recommend much 

less insist that Jerry Goodman diversify his portfolio in such a manner constituted gross 

negligence and breach of fiduciary duty. 

71. Goldman Sachs altogether failed to satisfy its duty to create and present to 

Goodman legitimate, alternative, custom-designed portfolios, reflecting varying rates ofrisk and 

return suited to Goodman's individual needs, or to implement and maintain a diversified 

portfolio designed to meet Goodman's yearly cash needs, while protecting his principal on an 

inflation adjusted basis. 

72. Goldman Sachs dispensed its written investment advice to Jerry Goodman 

without first undertaking any effort or process to ascertain Goodman's investment objectives, or 

to understand his life circumstances or risk tolerance. Nor did Goldman Sachs obtain a genuine 

client profile created by Ayco for Jerry Goodman, because none existed. 

73. From the inception of its relationship with Jerry Goodman, Goldman Sachs 

exploited its position of trust and confidence a position created and reinforced by the explicit 

statements of Larry Abrahams, Christopher Duda and others to the effect that Goldman Sachs 

was working together with Ayco as Jerry Goodman's financial advisor to "pitch" investments 

to Jerry Goodman in order to create lucrative profits for Goldman Sachs. 

74. In sum, Goldman Sachs caused massive injury to Jerry Goodman through: (i) its 

neglect and breach of duty in dispensing investment advice to Jeny Goodman without first 

496741-1 

14


evaluating Goodman's individual needs, investment objectives and risk tolerance; (ii) its failure 

to warn Jen-y Goodman that his portfolio was dangerously over-concentrated in a single 

investment; (iii) its failure to recommend and implement a diversified portfolio designed to meet 

Goodman's specific needs, which contained investments across a broad range of suitable asset 

classes; (iv) its neglectful provision ofwritten recommendations that Jerry Goodman continue to 

maintain a portfolio with 70% of his assets concentrated in the "alternative investment" category, 

which reinforced Jerry Goodman's incorrect belief that his money was invested safely and 

suitably for a person of his age, needs and risk tolerance; and (v) its failure to raise any objection 

to Jerry Goodman's investment in the MadoffFund, which Goldman Sachs, on information and 

belief, had itself deemed to be an untrustworthy investment. 

75. Despite maintaining direct contact with the Goodman Family in the years 

following the 2004 meeting, Goldman Sachs never rectified, or attempted to rectify, its 

misconduct. 

76. Had Goldman Sachs satisfied its duties to Jerry Goodman, Goodman would have 

had a genuine, diversified portfolio as of approximately May 2004, which would exist today. 

Goldman Sachs' breaches of duty to Jerry Goodman proximately caused damage to Jerry 

Goodman in excess of $15 million. 

D. Goldman Sachs Falsely Advises Goodman That His Investment In The Madoff Fund 

Is Insured For Its Full Face Value, Beyond The Limits Of Federal SIPC Insurance 

77. The massive injury resulting from Goldman Sachs' misconduct in 2004 and 

thereafter was compounded when, in 2008, Jerry DelSordo, then Goodman's point of contact at 

Ayco, with actual and/or apparent authority to speak on Goldman Sachs' behalf, unequivocally, 

but falsely, advised the Goodmans that: (i) the Madoff Fund investment was insured for the full 

amount of its face value by additional private insurance (i.e., beyond the limit of federal 

496741-1 

15


insurance sources like SIPC); and (ii) DelSordo had double checked on this issue with Goldman 

Sachs, and Goldman Sachs had assured him that Jerry Goodman's investments were fully 

protected by private insurance. 

78. DelSordo's false assurances responded to pointed and explicit questions from the 

Goodman Family regarding whether the Madoff Fund (and Goodman's other, smaller 

investments) were insured, and are contained in more than one email in Goodman's possession. 

For example, an email from Jerry DelSordo to Kevin Goodman, dated October 10, 2008, states: 

(Emphasis supplied.) 

Madoff- Under the consumer protection act, your net equity 

assets are 

covered even if the firm were to go bankrupt. In cases, of fraud or missing 

assets, SIPC covers up to $500,000, and I was told they have insurance such 

as CAPCO that covers the amounts exceeding $500,000. 

79. DelSordo had actual and/or apparent authority to respond to the Goodman 

Family's questions concerning insurance on Goldman Sachs' behalf, and Goldman Sachs is 

liable for the damages directly and proximately caused by the false representation. 

E. Jerry Goodman Is Damaged By Goldman Sachs' Misconduct 

80. Had Goldman Sachs warned Jerry Goodman that his principal 

was at risk because 

it was dangerously over-concentrated in a single investment, Goodman's approximately $15 

million loss upon the collapse of the Madoff Fund would have been averted. 

81. Likewise, had Goldman Sachs advised Goodman, on information and belief, that 

the Madoff Fund had been banned by Goldman Sachs, Goodman would have exited that 

investment entirely, and would not have permitted additional capital to be allocated that 

investment. 

82. Moreover, but for the express (but false) assurances of Ayco advisors acting with 

actual and/or apparent authority to speak on Goldman Sachs' behalf to the effect that Jerry 

496741-1 

16


Goodman's investment in the Madoff Fund was insured for its full face value, Jerry Goodman 

would have exited the Madoff Fund before its collapse. 

83. Had Goldman Sachs fulfilled its fiduciary duty to Jerry Goodman to create a true, 

diversified portfolio for Jerry Goodman, that portfolio would currently: (a) be generating 

adequate annual income to meet Goodman's predictable cash needs without any invasion of 

principal; and (b) have a balance of assets available to generate returns consistent with prudent 

long term planning. 

84. But for Goldman Sachs' misconduct, Goodman's massive loss would not have 

occurred. Notwithstanding the well publicized "financial crisis, Jerry Goodman would have a 

current portfolio that would be participating in the economic recovery. Instead, Goodman's 

assets have been wiped out. 

85. By breaching its duties, Goldman Sachs also bolstered Jerry Goodman's false 

sense of financial security, which directly affected all of his financial decisions including, but not 

limited to, the withdrawals he made from his investment and bank accounts. 

86. Jerry Goodman has been damaged in a specific amount to be determined at trial 

but in no event less than an amount equal to the value of the portfolio Goodman would have had 

as of the time of the filing of this action if not for Goldman Sachs' misconduct. 

87. Goldman Sachs' unscrupulous practices in exploiting its position of confidence 

and treating Jerry Goodman as a sales target also pose a serious threat to the investing public. 

Punitive damages are necessary 

to deter Goldman Sachs and other financial advisors from 

making reckless investment recommendations for their own pecuniary gain, without first 

understanding the financial and life circumstances of their customers. 

88. Punitive damages are necessary to prevent Goldman Sachs from absorbing claims 

like Jerry Goodman's as a "cost of doing business." 

496741-1 

17

Case 3:10-cv-01247-FLW -LHG Document 1 Filed 03/09/10 Page1--4, %4,, 

of 21 

44s\8 

89. Punitive damages are also appropriate because of the recklessness of Goldman 

Sachs' misrepresentations concerning the insurance available for Jerry Goodman's investment 

accounts advice which the investing public relies on financial advisory firms to provide with 

skill, care and accuracy. The information given to Jerry Goodman, upon which he relied to his 

massive detriment, was false and without foundation, proximately causing him to lose in excess 

of $15 million. 

FIRST CAUSE OF ACTION 

(Breach of Fiduciary Duty) 

90. Plaintiff Jerry Goodman repeats and realleges each and every allegation set forth 

at Paragraphs 1 through 89 as though more fully set forth herein. 

91. Goldman Sachs owed a fiduciary duty to Jerry Goodman to provide financial 

advice and investment recommendations with reasonable skill and care. 

92. Goldman Sachs also owed a duty of loyalty to Jerry Goodman to provide 

investment advice that was in Jerry Goodman's best interests, and not to compromise that duty 

for Goldman Sachs' own financial gain. 

93. Goldman Sachs breached its fiduciary duty to Jerry Goodman by: (i) dispensing 

investment advice to Jerry Goodman without first evaluating Goodman's individual needs, 

investment objectives and risk tolerance; (ii) failing to recommend and implement a diversified 

portfolio designed to meet Goodman's specific needs which contained investments across a 

broad range of suitable asset classes; (iii) failing to warn Jerry Goodman that his portfolio was 

dangerously over-concentrated in a single investment and that almost the entirety of his principal 

could be lost as a result of an adverse event affecting that investment; and (iv) failing to warn 

Jerry Goodman that Goldman Sachs, on information and belief, had determined the very 

investment in which his assets were over-concentrated i.e., the Madoff Fund to be so 

496741-1 

18


suspicious as to merit an internal policy banning Goldman Sachs asset managers from investing 

client money with that fund. 

94. As a direct and proximate cause of Goldman Sachs' misconduct, Jerry Goodman 

has been injured in a specific amount to be determined at trial, but in no event less than an 

amount equal to the value of the portfolio Goodman would have had as of the time ofthe filing 

of this action if not for Goldman Sachs' failure to insist upon divestment from the Madoff Fund, 

and failure to create a diversified investment portfolio customized to meet Goodman's specific 

needs. 

95. Goldman Sachs also breached its fiduciary duty in making explicit, but false 

representations through Ayco managers, who had actual and/or apparent authority to speak on 

Goldman Sachs' behalf to the effect that Jerry Goodman's investment in the Madoff Fund was 

insured for its full face value. 

96. Jerry Goodman justifiably relied on Goldman Sachs' false representations 

concerning insurance in electing not to divest from the Madoff Fund, and was directly and 

proximately injured by his reasonable reliance on such false representations. 

SECOND CAUSE OF ACTION 

(Negligent Misrepresentation) 


at Paragraphs 1 through 96 as though more fully 

set forth herein. 


advice and investment recommendations, including advice concerning the insurance available for 

Jerry Goodman's investment accounts, with reasonable skill and care. 

99. Goldman Sachs through Ayco managers, who had actual and/or apparent 

authority to speak on Goldman Sachs' behalf negligently made incorrect statements to the 

496741-1 

19


Goodman Family to the effect that his investment in the Madoff Fund was insured for its full 

face value. 

100. These incorrect statements were made without reasonable investigation and/or 

without the exercise of reasonable skill and care. 

101. Jerry Goodman justifiably relied on Goldman Sachs' negligent and incorrect 

representations in electing not to divest from the Madoff Fund in 2008. 

102. Through his justifiable reliance on Goldman Sachs' negligent and incorrect 

statements, Jerry Goodman was directly and proximately injured in an amount in excess of $15 

million, which was the value of his investment in the Madoff Fund at the time he would have 

liquidated his investment in the Fund, but for Goldman Sachs' negligent and incorrect statements 

that the investment was insured for its full face value. 

THIRD CAUSE OF ACTION 

(Gross Negligence) 


at Paragraphs 1 through 102 as though more fully set forth herein. 


advice and investment recommendations with reasonable skill and care. 

105. Goldman Sachs' breaches of that duty, as set forth above, subjected Jerry 

Goodman to an unreasonable risk of harm, specifically, the loss ofvirtually his entire portfolio 

based on the failure of a single investment. 

106. In failing to warn Jerry Goodman of the potential hazards of his dangerously 

over-concentrated portfolio, and in dispensing self-serving investment advice designed to 

generate revenue for Goldman Sachs, Goldman Sachs failed to exercise even slight care or 

diligence. 

496741-1 

20


107. Goldman Sachs' breaches of duty proximately caused injury to Jerry Goodman in 

a specific amount to be determined at trial, but in no event less than an amount equal to the value 

ofthe portfolio Goodman would have had as of the time ofthe filing ofthis action ifnot for 

Goldman Sachs' misconduct. 

WHEREFORE, Plaintiff demands judgment against Defendant for: (i) damages equal to 

the value of the portfolio Goodman would have had as ofthe time of the filing ofthis action if 

not for Goldman Sachs' failure to create and implement a diversified investment portfolio 

customized to meet Goodman's specific needs (the "Invested Portfolio Loss"); or (ii) the greater 

of approximately $15 million or the Invested Portfolio Loss, should the Court determine that 

Goldman Sachs falsely represented to Goodman that the Madoff investment was insured against 

fraud or bankruptcy for its full face value of approximately $15 million; (iii) punitive damages in 

an amount to be determined at trial; and (iv) an award of attorneys' fees and the costs ofthis 

action. 

Dated: Mineola, New York 

March 9, 2010 

496741-1 

By: 

Meltzer, Lippe, Goldstein & litstone, LLP 

21 

/Z 

Ri 

Richard A. LippeAsq. 

Joshua A. Berman, Esq. 

190 Willis Avenue 

Mineola, New York 11501 

(516) 747-0300

DATE2/9/s 0 

Case 3:10-cv-01247-FLW -LHG Document 1-1 Filed 03/09/10 Page 

ttalS 44 (Rev. 12/07, NJ 5/08) CIVIL COVER SHEET 

The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service ofpleadings or other papers as required by law, except as provided 

by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use ofthe Clerk ofCourt for the purpose of initiating 

the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.) 

I. (a) PLAINTIFFS DEFENDANTS 

Jerome Goodman 

The Goldman Sachs Group, Inc. 

1 of 1 

(b) County of Residence of First Listed Plaintiff Warren County County of Residence of First Listed Defendant Delaware and NY 

(c) Attorney's (Firm Name, Address, Telephone Number and Email Address) 

Richard M. Howard, Esq., Meltzer, Lippe, Goldstein & Breitstone, 

LLP, 190 Willis Ave., Mineola, NY 11501 (516) 747-0300 

rhoward@meltzerlippe.com 

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE 

Attorneys (If Known) 

LAND INVOLVED. 

II. BASIS OF JURISDICTION (Place an "X" in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an "X" in One Box for Plaintiff 

(For Diversity Cases Only) and One Box for Defendant) 

O I U.S. Government 0 3 Federal Question PTF DEF PTF DEF 

Plaintiff (U.S. Government Not a Party) Citizen of This State 01I 1 0 I Incorporated or Principal Place 0 4 0 4 

of Business In This State 

0 2 U.S. Government IN 4 Diversity Citizen of Another State 0 2 NJ 2 Incorporated and Principal Place 0 5 0 5 

Defendant 

(Indicate Citizenship of Parties in Item III) 

of Business In Another State 

Citizen or Subject of a 0 3 0 3 Foreign Nation 0 6 0 6 

Foreign Country 

IV NATI IDU (IF QUIT IDIn...... "V'. (1... Et— (l..1., 

I CONTRACT TORTS FORFEITUREMENALTY BANKRUPTCY OMER STATUTES I 

O 110 Insurance PERSONAL INJURY PERSONAL INJURY 0 610 Agriculture 0 422 Appeal 28 USC 158 0 400 State Reapportionment 

O 120 Marine 0 310 Airplane 0 362 Personal Injury 0 620 Other Food & Drug 0 423 Withdrawal 0 410 Antitrust 

O 130 Miller Act 0 315 Airplane Product Med. Malpractice 0 625 Drug Related Seizure 28 USC 157 0 430 Banks and Banking 

O 140 Negotiable Instrument Liability 0 365 Personal Injury of Property 21 USC 881 0 450 Commerce 

O 150 Recovery of Overpayment 0 320 Assault, Libel & Product Liability 0 630 Liquor Laws I PROPERTY RIGHTS 0 460 Deportation 

& Enforcement ofJudgment Slander 0 368 Asbestos Personal 0 640 R.R. & Truck 0 820 Copyrights 0 470 Racketeer Influenced and 

O 151 Medicare Act 0 330 Federal Employers' Injury Product 0 650 Airline Regs. 0 830 Patent Corrupt Organizations 

O 152 Recovery of Defaulted Liability Liability 0 660 Occupational 0 840 Trademark 0 480 Consumer Credit 

Student Loans 0 340 Marine PERSONAL PROPERTY Safety/Health 0 490 Cable/Sat TV 

(Excl. Veterans) 0 345 Marine Product 0 370 Other Fraud 0 690 Other 0 810 Selective Service 

a 153 Recovery of Overpayment Liability 0 371 Truth in Lending t iiiMIEMINMEIIIIIIRTgla- TY 0 850 Securities/Commodities/ 

of Veteran's Benefits 0 350 Motor Vehicle X 380 Other Personal 0 710 Fair Labor Standards 0 861 HIA (I395ff) Exchange 

O 160 Stockholders' Suits 0 355 Motor Vehicle Property Damage Act 0 862 Black Lung (923) 0 875 Customer Challenge 

O 190 Other Contract Product Liability 0 385 Property Damage 0 720 Labor/Mgmt. Relations 0 863 DIWC/DIWW (405(g)) 12 USC 3410 

O 195 Contract Product Liability 0 360 Other Personal Product Liability 0 730 Labor/Mgmt.Reporting 0 864 SSID Title XVI 0 890 Other Statutory Actions 

O 196 Franchise Injury & Disclosure Act 0 865 RSI (405(g)) 0 891 Agricultural Acts 

I REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS 0 740 Railway Labor Act FEDERAL TAX SUITS 0 892 Economic Stabilization Act 

0 210 Land Condemnation 0 441 Voting 0 510 Motions to Vacate 0 790 Other Labor Litigation 0 870 Taxes (U.S. Plaintiff 0 893 Environmental Matters 

0 220 Foreclosure 0 442 Employment Sentence 0 791 Empl. Ret. Inc. or Defendant) 0 894 Energy Allocation Act 

0 230 Rent Lease & Ejectment 0 443 Housing/ Habeas Corpus: Security Act 0 871 IRS—Third Party 0 895 Freedom ofInformation 

0 240 Torts to Land Accommodations 0 530 General 26 USC 7609 Act 

0 245 Tort Product Liability 0 444 Welfare 0 535 Death Penalty IMMIGRATION 0 900Appeal ofFee Determination 

0 290 All Other Real Property 0 445 Amer. w/Disabilities 0 540 Mandamus & Other 0 462 Naturalization Application Under Equal Access 

Employment 0 550 Civil Rights 0 463 Habeas Corpus to Justice 

O 446 Amer. w/Disabilities 0 555 Prison Condition Alien Detainee 0 950 Constitutionality of 

Other 0 465 Other Immigration State Statutes 

O 440 Other Civil Rights Actions 

V. ORIGIN (Place an "X" in One Box Only) Appeal [NI I Original 0 2 Removed from 0 3 Remanded from 0 4 Reinstated or 0 5 

to District 

Transferred from Proceeding State Court Appellate 

anoer th disrc 

t i t 

0 6 Multidistrict 7 0 Judge from 

Court Reopened 

(specifv) 

Litigation 

Magistrate 

Judgment 

Cite_tbe I) 5. Civil Statute under which you are filing (Do not cite jurisdictional 

2 statutes unless diversity): 

26 ubt.., 

13:5VI. 

CAUSE OF ACTION 

of cause: 

a 

Brief description 

breach ot tuduclary duties 

VII. REQUESTED IN 171 CHECK IF THIS IS A CLASS ACTION DEMAND S lEi lIcI4:)) oda, 06CHECK YES only if demanded in complaint: 

COMPLAINT: UNDER F.R.C.P. 23 i JURY DEMAND: el Yes o No 

VIII. RELATED CASE(S) 

Explanation None 

(See instructions): 

JUDGE DOCKET NUMBER 

SIGNATURE OF ATTORNX OF 

o

Sachs"), alleges as follows: breaches of fiduciary duty and negligent ...

Create successful ePaper yourself

Delete template?

Save as template?