[ by Howard Haykin] Goldman Sachs Group Inc has agreed to pay $26.6 million to settle a lawsuit by investors who claimed they were misled into buying securities backed by risky loans from the now-defunct subprime mortgage lender New century Financial Corp. Investors led by the Public Employees' Retirement System of Mississippi claimed that Goldman's boilerplate disclosures for the $698 million GSAMP Trust 2006-S2 were false and misleading by failing to reveal how New Century had ignored its own underwriting standards and used inflated appraisals. They also faulted Goldman's due diligence for failing to find the problems when it bought New Century loans and packaged them into securities for the 2006 offering.  New Century went bankrupt the following year. Goldman spokeswoman Tiffany Galvin declined to comment. The case is one of many in which investors sought to hold banks responsible for allegedly misleading them about the quality of mortgage securities that they sold. Bank of America Corp's Merrill Lynch unit settled one such case for $315 million, while Wells Fargo & Co settled another for $125 million. Goldman's settlement calls for the Wall Street bank to pay $21.3 million to investors, or just $20 million if Dutch pension fund Stichting Pensionenfonds ABP, which has separately sued Goldman, were to chose not to join the class. A nother $5.3 million would go toward legal fees and other expenses. The settlement requires approval by U.S. District Judge Harold Baer in Manhattan. Lawyers for the plaintiffs said that when the lawsuit began in February 2009, investors had received more than $396 million of principal and interest on the GSAMP securities, while $177 million was outstanding and the rest had been written off. Noting that Goldman was "aggressively challenging damages," which they said could range from "near zero" to $320 million, the lawyers called the proposed settlement "extremely beneficial" in light of this range and the risk of litigation. Baer had awarded class-action status in February, rejecting Goldman's arguments that some of the investors were "highly sophisticated" and might even have had "storm warnings" about New Century's practices. Goldman in 2010 agreed to pay $550 million to settle U.S. Securities and Exchange Commission fraud charges over a collateralized debt obligation it sold, Abacus 2007-AC1 CDO. The case: Public Employees' Retirement System of Mississippi v. Goldman Sachs Group Inc et al, U.S. District Court, Southern District of New York, No. 09-01110. For further details go to:  [Reuters, 7/31/12].