Sources now say that Goldman Sachs was warned about a pending civil suit months ago and failed to disclose its legal problems—despite the standard practice of revealing legal issues like regulatory probes in quarterly and annual reports.The news comes in the wake of a suit filed against the firm by The Securities and Exchange Commission on Friday, charging the bank and one of its vice presidents with securities fraud. Goldman representatives reportedly took meetings with agency officials in an attempt to stave off the suit, and in March said merely that they were responding to "requests for information." The announcement on Friday caused the company’s stock to fall by 13 percent. The lawsuit focuses on a specific financial instrument that Goldman created called the Abacus 2007-AC1 after hedge-fund manager John Paulson—who made $3.7 billion in 2007 by correctly predicting that the housing bubble would burst—approached them wanting to make a bet against mortgage bonds. Goldman allowed Paulson to select the bonds he wanted to bet against, then it packaged those bonds in the Abacus 2007-AC1 and sold them to investors like pension funds. Those investors eventually lost billions of dollars on the bond when the bubble burst while Paulson raked in a profit. The New York Times writes, "[T]he deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to default."