The Sept. 26, 2006, document offered sophisticated U.S. and European investors an opportunity to buy into a pool of supposedly high-grade bonds backed by residential, commercial and student loans. The transaction was registered through a shell company in the Cayman Islands.

Few of the potential investors knew it, but the ratings of many of the mortgage securities hid their true risks and, in some cases, Goldman's descriptions exaggerated their quality.

The Cayman offering - one of perhaps dozens made through the British territory - occurred as Goldman began to ditch the subprime mortgage business before the U.S. housing market collapsed under an avalanche of homeowner defaults.

In all, Goldman sold more than $57 billion in risky mortgage-backed securities during a 14-month period in 2006 and 2007, including nearly $39 billion issued from mortgages it purchased. Meanwhile, the firm peddled billions of dollars in complex deals, many of them tied to subprime mortgages, in the Caymans and other offshore locations.

Many of those securities later soured, but the sales allowed Goldman to become the only major U.S. investment bank to escape the brunt of the subprime meltdown.

One bond analyst who reviewed the 2006 Cayman deal dismissed it in a report to clients as "a not so cleverly disguised way for Goldman Sachs & Co. to unload its unwanted exposures to the subprime real estate market onto foreign investors."

Goldman spokesman Michael DuVally said that the firm "sold mortgage securities only to sophisticated investors" and disclosed "all the appropriate information available."

McClatchy also found at least two instances in which Goldman appeared to mislead investors. In one, the firm said that $65.3 million in securities were backed by safe "prime" mortgages when the same loans had been labeled a cut below prime in a U.S. offering. In the other, Goldman listed $10 million as "midprime" loans when the underlying mortgages had been made to subprime borrowers with shaky finances.

DuVally said that the descriptions were consistent with the standards set by Moody's, the bond-rating agency.

The secret Cayman Islands deals provide a window into one method that Goldman and other Wall Street firms used to draw European banks and other foreign financial institutions into investing hundreds of billions of dollars in securities tied to risky U.S. home loans.

Experts estimate that Wall Street investment banks sold 25 percent to 50 percent of these bonds and related securities overseas, resulting in massive losses in Europe and elsewhere when the market collapsed.

Last spring, the International Monetary Fund projected that global write-downs on "U.S.-originated assets" stemming from the subprime disaster could reach $2.7 trillion.

Underscoring the role of tax havens as a Wall Street marketing tool, a Treasury Department report found that as of June 30, 2008, $164 billion in U.S. mortgage-backed securities were held in the Cayman Islands and $22 billion more were held in Luxembourg, another tax-friendly zone.

Gary Kopff, a securitization expert who analyzed unpublished industry data, said that Goldman packaged or marketed offshore deals worth at least $83 billion from 2002 to 2008. These deals, called collateralized debt obligations, amounted to a $1.3 trillion global market, and Goldman reaped as much as $1.66 billion for assembling and selling them.

Some of Goldman's subprime mortgage securities wound up in the hands of financially struggling Eastern European governments such as those in Romania, Bulgaria, Slovakia and Slovenia, said a Wall Street expert involved in trading those types of securities who declined to be identified because of the matter's sensitivity. This person said that one Slovakian bank's multimillion-dollar investment wound up worthless.

DuVally said the company could find no record of marketing the bonds in those countries, but that the securities may have gotten there through the resale market.

Subprime-backed mortgage securities that were sold at the crest of the housing market in 2006 and 2007 have shown the most precipitous drop in value, with default rates on the underlying mortgages exceeding 30 percent. For many cash-strapped borrowers, it was easy to walk away from soaring monthly payments when their mortgage balances exceeded the lower value of their homes.

The 2006 Cayman deal was part of a flurry of Goldman activity in the hidden, unregulated parts of the securities industry. Goldman's traders also made huge bets that those securities would lose value by buying insurance-like contracts, called credit-default swaps, with private parties. Beginning early in 2007, they bought swaps on a London-based exchange.

Every Goldman bet on the exchange's subprime index, which was run by the London-based financial services company Markit, was on a basket of bonds that included a bundle of its own subprime-related securities.

Germany's Deutsche Bank, the trustee holding mortgages for scores of Goldman's bond offerings, also lists more than 50 private Goldman deals on its Web site. Of those, 42 were backed by risky mortgages.

In marketing exotic deals that typically include subprime mortgage-backed securities, Goldman and other Wall Street firms have long used the Caymans as a gateway to European investors, said an official of a German bank, who wasn't authorized to speak publicly and declined to be identified.

The 2006 Cayman deal was outside the reach of U.S. tax laws and free of U.S. regulation. Goldman circulated the deal under the names of Cayman-based Altius III Funding Ltd., and a sister firm registered in Delaware, both created for the sole purpose of facilitating the transaction.

The offering drew a scornful reaction from the bond analyst who warned investment clients to stay away. The analyst's report, a copy of which was obtained by McClatchy, described Goldman as "a single underwriter solely interested in pushing its dirty inventory onto unsuspecting and obviously gullible investors."

". ... In this case, it is a foregone conclusion that many relatively senior bondholders will suffer severe losses," said the analyst's report, which was made available on the condition of anonymity because the offering barred unauthorized disclosure.

McClatchy also learned of a second private Goldman deal, in which it sought in May 2007 via another Cayman company to sell $44.6 million in bonds related to subprime loans written by New Century Financial, a mortgage lender that weeks earlier had careened into bankruptcy after California regulators closed it.

For foreign banks, the lure was spelled AAA. Under both public and private deals, experts said, 80 percent or more of the bonds carried top grades from financial rating companies, assuring investors that the securities were among the safest plays in the financial world.

The triple-A rating was "the clincher," said an official of another German bank, who also wasn't authorized to speak publicly and requested anonymity.

Few investors, however, knew that Goldman and other Wall Street dealers were paying the biggest U.S. financial ratings firms for grading the risky bonds.

Sylvain Raynes, a former analyst for Moody's Investors Service, the largest U.S. rating firm, likened the Wall Street firms' relationships with the rating agencies to hiring "a high-class escort service."

Typically, he said, an investment banker would meet with analysts for a ratings agency, describe a mortgage pool "and propose his dream result."

"The agency would call back after the meeting and intimate that they 'could get there' sight unseen," said Raynes. "Both parties understood what that meant, and the agency would be hired to rate the deal."

After bestowing untold numbers of triple-A ratings on subprime-backed bonds, Moody's and the second- and third-largest rating agencies, Standard & Poor's and Fitch, began to downgrade hundreds of pools of the securities in the summer of 2007, including the offshore deals known as collateralized debt obligations.

That set off a chain reaction that culminated in last year's Wall Street meltdown. Since then, both Moody's and S&P have downgraded slices of the Altius III deal several times.

U.S. pension funds that have lost money on subprime mortgage-backed bonds have filed suits accusing Goldman, Morgan Stanley and Merrill Lynch of failing to inform them of the bonds' true risks. (Merrill is now part of Bank of America.)

Many European institutions that lost money on the securities, however, have fewer legal options.

Few of them are pointing fingers at Goldman or other U.S. investment banks. McClatchy contacted several European banks about their subprime losses and got similar responses when the banks were asked where they'd bought them.

Germany's IKB Deutsche Industriebank, whose 2007 near-collapse from subprime losses awakened Europe to the impending financial crisis, has written off about $19 billion (in current U.S. dollars) related to U.S. mortgages. A spokeswoman for the bank declined to say which investment banks sold it bonds.

Several of Germany's seven regional "landesbanks," or land banks, also took a pounding. With $7.2 billion in aid from the state of Bavaria, Munich-based Bayern LB, Germany's sixth-largest bank, has reserved $8.95 billion for losses in its asset-backed securities portfolio, which includes subprime loans. A Bayern spokesman declined to say who sold the bank the risky bonds.

Spokespeople for the Royal Bank of Scotland, which bought a Dutch subprime subsidiary and has reported tens of billions of dollars in losses, and the French bank Societe General, which lost more than $6 billion, also declined to identify any U.S. investment banks as the source of their problems.

"Are we angry against the U.S. banks?" a German bank official said, requesting anonymity because of the matter's sensitivity. "We looked at the triple A's like the other banks, and we bought this, yeah. It doesn't help much to be angry."