'Fabulous Fab' liable in fraud case

Former Goldman Sachs trader faces fines and a ban from finance for role in 2007 mortgage crisis

Former Goldman Sachs bond trader Fabrice Tourre arrives at Manhattan federal court with his lawyers in the civil fraud case against him. (Emanuel Dunand/AFP/Getty Images)

A jury in New York on Thursday found Fabrice Tourre, the former Goldman Sachs trader known as “Fabulous Fab,” liable on six of seven fraud charges brought by the Securities and Exchange Commission (SEC) in response to the 2007 mortgage crisis that helped push the country into recession.

Tourre faces potential fines and a possible ban from the financial industry, though the exact punishment will be determined at a future proceeding.

The SEC has described Tourre as the face of “Wall Street greed,” while his attorney’s portrayed him as a scapegoat in a downturn caused by larger economic forces.

The SEC had accused Tourre of misleading institutional investors about subprime-mortgage securities that he knew were doomed to fail, setting the stage for a valued Goldman hedge-fund client, Paulson & Co. Inc., to secretly bet against the investment.

The maneuver made $1 billion for the hedge fund and its wealthy president, John A. Paulson, and millions of dollars in fees for Goldman. The SEC also sought to show that it helped earn Tourre a bonus that boosted his salary to $1.7 million in 2007.

SEC prosecutors confronted Tourre in court with an e-mail he sent in January 2007 that they allege deliberately misled another institutional investor about Paulson's short position in the investment called Abacus 2007-AC1.

Asked repeatedly if the information in the email was "false," Tourre responded, "It was not accurate."

He added: "I wasn't trying to confuse anybody; it just wasn't accurate at the time," according to The Associated Press.

"We're obviously gratified by the jury's verdict and appreciate their hard work," SEC lawyer Matthew Martens told The AP.

Tourre left the courthouse without speaking to reporters. His attorney also had no immediate comment.

In closing arguments, Martens called Tourre's testimony "surreal, imaginary, unreal, dream-like" and told jurors that the defendant wanted them "to live in his imaginary land ... to live in a fantasy world."

"Only if you close your eyes to the facts, you can find Mr. Tourre not liable for his actions," he added.

Tourre's attorney, John Coffey, countered that the government had "unjustly accused him of wrongdoing," noting to jurors that all similar mortgage securities “went off the cliff as well” after 2007.

The civil case had been called the most significant legal action related to the mortgage-securities meltdown, but it lacked the drama and high stakes of white-collar criminal cases. Much of the testimony was devoted to the intricacies of synthetic collateralized debt obligations, or CDOs -- a complex type of investment central to the case.

Some of the testimony focused on a personal email Tourre sent to his girlfriend in France. SEC lawyers said it proved the arrogance of a man at the center of a massive fraud, while his defense team said it was "an old-fashioned love letter" penned by a young trader who was full of self-doubt and angst over upheaval in the financial world.

Writing in French, Tourre said of the financial markets: "The whole building is about to collapse anytime now."

"Only potential survivor, the fabulous Fab ... Standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!"

Pressed by Marten on what he meant, Tourre replied, "I didn't create any monstrosities."

Goldman settled with the SEC in 2010 by paying a $550 million fine without admitting or denying wrongdoing. Tourre left the firm in 2012.

Al Jazeera and The Associated Press

Related News

Find Al Jazeera America on your TV

Get email updates from Al Jazeera America

Sign up for our weekly newsletter


Get email updates from Al Jazeera America

Sign up for our weekly newsletter