Goldman Sachs trader denies wrongdoing in fraud probe

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The Independent Online

The Goldman Sachs trader at the centre of fraud allegations denied wrongdoing today as he faced a hostile committee of US senators.

London-based Fabrice Tourre - one of four current and former staff at the investment bank giving evidence - was named in a civil lawsuit by the US Securities and Exchange Commission (SEC) 10 days ago.



The SEC says Goldman failed to disclose that one of its clients helped create - and then bet against - sub-prime mortgage bonds that the bank sold to investors including Royal Bank of Scotland.



Mr Tourre - who called himself 'Fabulous Fab' - said: "I deny categorically the SEC's allegations and I will defend myself in court against these false claims."



He told the US senate's subcommittee on investigations that Abacus - the complex mortgage-based product at the heart of the claims - was "not designed to fail" and that Goldman Sachs had "no economic motive" for it to collapse.



But the bank was hauled over the coals by committee chairman Carl Levin, who said it had treated customers as "objects for its own profit".



Mr Levin said the bank had "taken advantage of its clients' reasonable expectation that it would not sell products which it did not want to succeed".



The Financial Services Authority has launched its own probe in the UK to the claims over Abacus.



Mr Levin said it was "deeply troubling" that Goldman was betting against the sub-prime mortgage market in 2007 while selling investments based on high-risk mortgages to its clients.



The committee's findings "show a Wall Street culture that, while it may once have focused on serving clients and promoting commerce, is now all too often simply self-serving", the chairman added.



"The ultimate harm here is not just to clients poorly served by their investment bank. It's to all of us," Mr Levin said.



He added: "Instead of doing well when its clients did well, Goldman Sachs did well when its clients lost money.



"Its conduct brings into question the whole function of Wall Street, which traditionally has been seen as an engine of growth, betting on America's successes and not its failures."



Last week the bank - which denies the fraud allegations - said net income almost doubled to 3.5 billion US dollars (£2.2 billion) in the first quarter of 2010 - as well as revealing 5.5 billion dollars (£3.6 billion) in first quarter pay and bonuses.

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