Fabrice Tourre fraudulently misled investors in a bid to “feed Wall Street greed,” giving them “half the truth” about a sub-prime mortgage investment that ultimately went bad when the credit crunch tore through the housing market, a lawyer for the US Securities and Exchange Commission claimed yesterday in a closing argument before a New York jury.
Mr Tourre, a former Goldman Sachs vice president, is being tried on allegations that while working at the investment bank he misled investors who backed a complex mortgage-based security by failing to inform them that a prominent hedge fund not only helped create the instrument in 2007 but also placed bets that its value would decline. When the housing market turned sour, the Paulson & Co, which is not accused of any wrongdoing, made a profit, while investors such as ABN Amro, now owned by Royal Bank of Scotland, were left nursing combined losses of around $1bn.
The SEC’s top lawyer, Matthew Martens, yesterday tried to convince a jury of nine men and women that Mr Tourre was guilty of committing fraud when he worked on the security known as Abacus. Goldman is not accused in the case, having settled with the SEC as part of a deal under which it paid $550m without admitting or denying any guilt.
Mr Martens told the jurors that Mr Tourre, who denies the charges, wanted them to “live in a fantasy world.” “Only if you close your eyes to the facts [can you] find Mr. Tourre not liable for his actions,” he said.
Later, Mr Tourre’s counsel, John Coffey, told jurors that the former banker, who faces the possibility of a fine and a potential ban from working in the securities industry if he loses the case, was just an individual fighting to prove his innocence. “He refuses to yield to a powerful government agency,” he said.
The closing arguments came after lawyers for Mr Tourre decided against calling any witnesses on Monday, speeding up the trial in what was a surprise move.
Over the past fortnight, the two sides have been questioning witnesses, including Mr Tourre, in what is one of the few cases stemming from the financial crisis where an individual has been put on trial.
The SEC, facing widespread criticism of its failure to prosecute individuals after the crisis, is hoping for a rare victory in the civil case against the 34 year old French national. Already, Mr Tourre has become something of poster-child for Wall Street excess, after emails from 2007 emerged in which he boasted to his then girlfriend that “the whole building is about to collapse anytime now... the only potential survivor, the fabulous Fab.” During the trial, he portrayed the message as nothing more than a “silly, romantic” note, which he regrets.