Former Goldman banker Fabrice Tourre defrauded investors, US court rules

Former vice-president found liable after complex subprime mortgage deal that led to $1bn losses

New York

The former Goldman Sachs vice-president Fabrice Tourre has been found liable for defrauding investors in a complex subprime mortgage deal that left them nursing $1bn (£756m) in losses when the financial crisis tore through the housing market.

A federal jury of nine men and women decided against the 34-year-old French national on their second day of deliberations in what is one of the highest-profile cases to emerge from the financial crisis. Mr Tourre now faces the prospect of a hefty fine. He could also be barred from working on Wall Street after the jury found him liable on six of the seven counts of violating securities laws that had been levelled against him.

Facing criticism for its failure to pursue individual bankers in the aftermath of the crisis, the Securities and Exchange Commission, the body responsible for policing US markets, had lined up its top lawyers against Mr Tourre, whose defence was paid for by Goldman Sachs.

“We are gratified by the jury’s verdict,” Andrew Ceresney, the co-head of SEC’s enforcement arm, said. “We will continue to vigorously seek to hold accountable, and bring to trial when necessary, those who commit fraud on Wall Street.”

Goldman Sachs was not part of the trial, having settled with the SEC by paying $550m in a deal under which it did not admit or deny any wrongdoing. 

The case centred on a complex mortgage-based security called Abacus. Mr Tourre worked on the security while employed by Goldman Sachs, and the SEC claimed that he had misled investors who backed Abacus by failing to inform them about the role of a prominent Wall Street hedge fund called Paulson & Co.

The Paulson fund helped select the mortgages that made up Abacus. The fund then placed bets against the security, in contrast to investors such as ABN Amro, who backed Abacus. When the financial crisis depressed mortgage values, the security collapsed, earning a profit for Paulson – but leading to a combined loss of around a $1bn for investors like ABN, which is now owned by the Royal Bank of Scotland. The fund, which was said by the SEC to have made a profit of a similar amount, was not accused of any wrongdoing.

Although the trial has ended in a  victory for the regulator, critics have questioned the SEC’s decision to go after a mid-level Goldman employee after settling with the powerful Wall Street bank.

Responding to the jury’s verdict, Goldman Sachs said: “As a firm,  we remain focused on being more  transparent, more accountable, and more responsive to the needs of our clients.”

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
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

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links