The SEC's complaint says Paulson "heavily influenced the selection of the portfolio" for the CDO. But Paulson said in a Friday statement that portfolio selection agent ACA Management LLC "had sole authority over the selection of all collateral in the CDO." Those securities were later rated AAA by credit rating agencies.
Here's a CDO that was essentially created for the sole purpose of being shorted. You can debate over whether Paulson actually cherry-picked which specific investments would go into the portfolio, but even if you credit Goldman's position that Paulson was hands-off in the assembly of ABACUS, it only existed in the first place because Paulson wanted something to bet against.
And this festering pile of crap got an AAA rating.
Cole over at BJ rants about this all the time, and this is one more example of why he's absolutely right -- the rating agencies need to be held accountable for completely and utterly failing to do their job.