Fabrice Tourre, the former Goldman Sachs banker, has been found liable
for his role in a massive mortgage securities fraud that cost
investors $1bn (£661m).
"Fabulous Fab", as he calls himself, was found liable by a
nine-member jury for six of the seven charges against him. He now
faces potential fines and a possible ban from the financial industry.
The 34-year-old, who had denied wrongdoing, was sued by America's
Securities and Exchange Commission in the highest-profile trial to
emerge from the financial crisis.
The SEC described Tourre as the "face of Wall Street greed" and
claimed he hoodwinked investors into ploughing money into a sub-prime
mortgage vehicle called Abacus while he was at Goldman.
The SEC claimed Tourre and the hedge fund Paulson & Co conspired to
hook buyers by suggesting that founder John Paulson was also backing
the vehicle, on the assumption that house prices would rise. In fact,
Mr Paulson had taken a short position, betting that house prices would
fall. The manoeuvre ended up making $1bn for the hedge fund.
The SEC also sought to show that the scheme helped earn Tourre a bonus
that boosted his salary to $1.7m in 2007.
Goldman settled with the SEC to the tune of $550m without admitting or
denying wrongdoing to avoid a similar trial, but has covered Tourre's
legal fees despite him leaving the bank last year.
In a statement on Thursday, Goldman said: "As a firm, we remain
focused on being more transparent, more accountable and more
responsive to the needs of our clients."
The SEC said it was "gratified" by the outcome. "We will continue to
vigorously seek to hold accountable, and bring to trial when
necessary, those who commit fraud on Wall Street," said Andrew
Ceresney, the SEC's co-director of enforcement. "Mr Tourre... put
together a complicated financial product that was secretly designed to
maximise the likelihood that it would fail, and marketed and sold it
to investors without appropriate disclosure,"
US District Judge Katherine Forrest instructed both sides to submit
proposals by August 23 for what she termed "next steps". The judge
will determine any financial penalties for Tourre.
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