Ex-Goldman Sachs executive 'Fab' Fabrice Tourre takes the stand over 'misleading investors'
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Thursday 25 July 2013
Fabrice Tourre, the former Goldman Sachs executive currently being tried in New York on allegations of misleading investors about a subprime mortgage-related deal that left them with heavy losses, took the stand for the first time yesterday, saying he was not attempting to “confuse” anyone about the deal, even though he acknowledged relaying inaccurate information to a participant.
At the heart of the case against Mr Tourre is an investment called Abacus. The Securities and Exchange Commission (SEC) alleges that while at Goldman, Mr Tourre misled some investors about the role of the Paulson & Co hedge fund in selecting the subprime mortgages that made up the investment. When the subprime mortgage market imploded, triggering the financial crisis, Paulson, which is not accused in the case, made money as a result of betting against Abacus. But investors who had backed the security lost money to the tune of around $1bn.
Goldman Sachs is not part of the trial, having already settled with the SEC. The investment bank struck a deal with the regulator in 2010 under which it agreed to pay $550m without admitting or denying any wrongdoing.
Yesterday in court, the 34-year-old Frenchman was asked about a January 2007 email he sent to ACA Capital, which participated in the deal. In it, Mr Tourre said part of the deal was “pre-committed,” a phrase that a former ACA executive called Laura Schwartz has said was part of the reason she thought that Paulson was betting in favour of Abacus, not against it.
When SEC lawyer Matthew Martens asked Mr Tourre if the statement in the email was false, the former Goldman executive responded that “it was not accurate”. But he added: “I wasn’t trying to confuse anybody, it just wasn’t accurate at the time.”
The jury trial is being presided over by Judge Katherine Forrest, and is expected to last until the end of next week. Nine members of the public will decide whether or not Mr Tourre is guilty. If the trial goes against him, he faces the possibility of a fine and a lifetime ban on working in the securities industry.
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