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REUTERS

Ex-Goldman trader ordered to pay over $825,000 in SEC fraud case

March 12, 2014 - 11:20am


NEW YORK (Reuters) — A U.S. judge on Wednesday ordered former Goldman Sachs Group Inc. trader Fabrice Tourre to pay more than $825,000 after a jury found him liable for defrauding investors in a complex investment product linked to subprime mortgages.

The decision by U.S. District Judge Katherine Forrest in Manhattan came in one of the highest-profile cases brought by the U.S. Securities and Exchange Commission in response to the events leading up to the 2008 financial crisis.

Tourre was ordered to pay $650,000 in civil fines and give up an additional $175,463 plus interest, representing the portion of his bonus attributable to the transaction at the heart of the case.

In handing down the penalties, the judge cited the months-long nature of Tourre's fraudulent conduct, which involved “false emails and misleading marketing materials that were distributed to potential investors.”

“He has shown no remorse or contrition,” Forrest said.

Forrest also barred Tourre from seeking to have Goldman cover his civil fines but said he could seek reimbursement from others. She denied the SEC's request for an injunction barring the defendant from violating federal securities laws but said the regulatory agency could reapply if he re-enters the securities industry in the next three years.

The SEC had sought to recoup $1.15 million from Tourre, including a $910,000 fine plus ill-gotten gains and interest.

Tourre said in a statement that he was “deeply grateful for the unwavering support of my family and friends as I consider potential next steps in the legal process.”

A spokesman for the SEC did not immediately respond to requests for comment. A Goldman Sachs spokesman declined to comment.

Tourre, a 35-year-old Frenchman, became a symbol of the financial meltdown after the SEC sued him in 2010. He got the nickname “Fabulous Fab” thanks to an email he wrote that was cited in the lawsuit.

Tourre was sued alongside Goldman Sachs, which agreed in July 2010 to pay $550 million to settle the SEC charges.

In August, a federal jury found him liable on six of seven civil charges stemming from SEC claims that he misled investors in a synthetic collateralized debt obligation, or CDO, linked to mortgages called Abacus 2007-AC1.

The SEC accused Tourre of concealing from investors that Paulson & Co, the hedge fund of billionaire John Paulson, had helped put the transaction together and had bet it would fail.

The agency also accused Tourre of misleading ACA Capital Holdings Inc, which helped choose Abacus assets, into thinking Paulson would be an equity investor in the CDO, rather than bet the other way as part of a massive wager against subprime mortgages.

“The fraud on ACA was critical to making the transaction work; without ACA as portfolio selection agent, Goldman would not have been able to convince others to invest in the equity of the transaction,” Forrest wrote.

Paulson made about $1 billion from his short position on Abacus, while investors lost the same amount, the SEC said.

Tourre, who denied wrongdoing, resigned from Goldman in December 2012 and is pursuing a doctorate in economics at the University of Chicago.

He had been slated to teach an honors economics class this spring, but a university spokesman on March 4 said those plans had been scrapped. No reason was given for the change.

Goldman did not admit or deny wrongdoing, but acknowledged that Abacus' marketing materials contained incomplete information.

 



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