Judgment day looms for 'Fabulous' Fabrice Tourre

The jury has retired in the fraud case against the former Goldman Sachs trader. But is he a real-life Gordon Gekko or merely a humble employee?

In early 2007, not long before the first tremors of the credit crunch were felt on Wall Street, a young Goldman Sachs executive in New York sent a now-infamous email to his then girlfriend, boasting that "the whole building is about to collapse any time now... the only potential survivor, the fabulous Fab".

Now, Fabrice Tourre, the trader behind that email, faces an altogether different prospect, as a jury of nine men and women considers evidence against him in a civil trial that could land him with a hefty fine and a lifetime ban from working in the securities industry.

Already, he has become a poster-boy for the excesses of the financial industry, thanks in no small part to that apparently hubristic email (in court, he portrayed the messages as nothing more than a "silly, romantic" note to his girlfriend, which he regrets). In 2010, Newsweek magazine noted how for some he had become a "real-life Gordon Gekko". But, arriving for the first day of his trial at a Manhattan courtroom last month, the 34-year-old could not have looked more different from Oliver Stone's cocky, nefarious Wall Street protagonist: dressed in a black suit, white shirt and a simple orange tie, he looked overwhelmed as he made his way through the media scrum that was waiting for him outside the courthouse building.

In the dock , however, the Securities and Exchange Commission (SEC), the body responsible for policing the US markets, alleged that the boyish-looking Frenchman's actions while working on a complex mortgage-related deal at Goldman did, in fact, exemplify the worst of Wall Street. "It was a billion dollar fraud to feed Wall Street greed," Matthew Martens, the SEC's top lawyer, said. "It's a case about lies, trickery and deception."

The alleged fraud in question centres on an investment called Abacus. Goldman Sachs created the security, a synthetic collateralised debt obligation (CDO), using sub-prime mortgages, the kind that imploded when the credit crunch knocked Wall Street off its feet. Mr Tourre worked on the investment while at Goldman. When the mortgage market collapsed, Abacus turned sour, and the investors who had bet that its value would rise found themselves deep in the red.

The claim of fraud stems from the role of Paulson & Co, the Wall Street hedge fund run by the billionaire investor John Paulson. It became famous during the crisis for making money when others in the financial sector were struggling to contain losses.

The hedge fund played a role in picking the mortgages that made up Abacus. It then went on to bet against the investment. The SEC alleges that Mr Tourre misled clients by failing to disclose the Paulson fund's role in Abacus, thus withholding information that investors needed to make an informed decision about whether they should bet on the security. Among the investors that lost money was ABN Amro, now part of Royal Bank of Scotland. The SEC says investors in Abacus collectively lost more than $1bn (£666m), while Paulson booked profits.

The fund is not accused in the case. And Goldman Sachs is not facing trial. The investment bank agreed to settle with the authorities by paying $550m as part of a deal under which it did not admit or deny the allegations.

That left Mr Tourre, whose trial took place in a building that sits roughly a mile away from Goldman's offices. For the SEC, the case goes to the heart of a key episode from the financial crisis, even though its critics have questioned the wisdom of going after a mid-level employee when it has already struck a deal with the investment bank.

Right from the start, the shadow of the financial crisis was inescapable inside the courtroom. During the jury selection on the first morning, Judge Katherine Forrest screened potential jurors by questioning them on, among other things, their view of the role of banks during the crisis. One potential juror was excused when he admitted that he had such a "jaundiced view" of their actions that he could not be fair during the trial.

Next came the jargon. Judge Forrest urged lawyers for both the SEC and Mr Tourre to "have a heart" and avoid technical terms. "Don't assume people know what an investment bank does," she said, noting that a CDO, for example, was "gibberish unless you explain it". "Mere mortals don't know what a trading desk is," she added.

Mr Tourre's lawyers insisted that he did not do anything wrong and sought to play down the significance of the email in which the former Goldman employee labels himself the "only potential survivor... standing in the middle of all these complex, highly leveraged exotic trades without necessarily understanding all of the implications of those monstruosities [sic]!!!"

The SEC countered by questioning Mr Tourre himself when he took the stand for the first time last week. Mr Martens turned to another email from 2007, sent by Mr Tourre to an executive at ACA Capital, which participated in the Abacus deal, first by helping set it up and then by investing in it.

In the message, Mr Tourre said part of Abacus was "pre-committed" to the Paulson fund, something that the ACA executive in question, Laura Schwartz, said she understood to mean that Paulson was backing the investment, not betting against it.

"I believed Paulson was the equity investor in the transaction," she said in her testimony.

Mr Martens asked Mr Tourre if the email statement was false. Speaking with a heavy French accent, he replied: "It was not accurate." But he added: "I wasn't trying to confuse anybody, it just wasn't accurate at the time."

Mr Martens asked Mr Tourre if there was "a difference in your mind between something being inaccurate or false?" Mr Tourre said there was.

The remark came on the first day of Mr Tourre's testimony. Speaking quickly, at one point during the questioning he knocked over a container of water as he reached for a file.

On day two of his testimony, while being questioned by his own lawyers, Mr Tourre explained why he had come to court. "I am here to tell the truth and clear my name," he said.

He went on to recount his path from suburban Paris to Goldman Sachs via Stanford University in California. He said his application to Goldman was motivated partly because of his desire to practise his English for job interviews. "I'd never heard of Goldman before coming to Stanford," he said.

In a surprise move earlier this week, his lawyers rested their case without calling any witnesses, thus bringing the evidence-giving part of the trial to an early conclusion.

The decision was seen as a sign of confidence. In his closing statement, John Coffey, Mr Tourre's lawyer, told the jury that the Frenchman was simply refusing "to yield to a powerful government agency".

The SEC, however, claimed that Mr Tourre was leading the jurors into "fantasy world", where he was innocent. "Only if you close your eyes to the facts [can you] find Mr Tourre not liable for his actions," Mr Martens said.

The decision is now in the hands of the jury: was Fabulous Fab at fault, or is he just a mid-level employee who is being blamed simply because the SEC wants to look tough?

'The whole building is about to collapse...': Fabrice Tourre

"The whole building is about to collapse any time 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 monstruosities!!!"

Email to Marine Serres, 23 January 2007

"It was a silly, romantic email to my girlfriend at the time as I was very stressed that day"

Fabrice Tourre in court, 25 July 2013

"Managed to sell a few Abacus bonds to widows and orphans that I ran into at the airport."

Email to Marine Serres, 13 June 2007

News
people'It can last and it's terrifying'
News
people Emma Watson addresses celebrity nude photo leak
Arts and Entertainment
tv
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
PROMOTED VIDEO
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Sport
Alexis Sanchez, Radamel Falcao, Diego Costa and Mario Balotelli
football
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
News
i100
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Derivatives Risk Commodities Business Analyst /Market Risk

£600 - £800 per day: Harrington Starr: Derivatives Risk Commodities Business A...

Power & Gas Business Analyst / Subject Matter Expert - Contract

£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...

Infrastructure Lead, (Trading, VCE, Converged, Hyper V)

£600 - £900 per day: Harrington Starr: Infrastructure Lead, (Trading infrastru...

Planning Manager (Training, Learning and Development) - London

£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering