Fabrice Tourre, the former Goldman Sachs Group Inc. vice president facing civil fraud claims over a mortgage bond debacle that made his client $1 billion, may say when he takes the witness stand today that he’s a scapegoat who was only trying to do his best for the firm.
Tourre, now a 34-year-old graduate student, is scheduled to testify before a jury in Manhattan federal court this afternoon about his role in structuring and selling a 2007 mortgage-backed investment that lost a group of investors about $1 billion when the mortgage market crashed. It will be his first chance to make good on a promise, made before Congress in April 2010, to fight the U.S. Securities and Exchange Commission’s allegations that he “categorically” denied.
Tourre’s testimony comes near the end of two weeks of evidence against him by the SEC, whose lawyers will try to use Tourre’s own words to show he misled investors about the role of Paulson & Co., the hedge fund run by John Paulson, in helping select the assets behind the investment, which it then bet against.
His best defense may be to emphasize his relative lack of stature at Goldman Sachs at the time of the Abacus deal, said Jacob Frenkel, a former SEC lawyer not involved the case.
“He was a small player and nobody was fooled here,” said Frenkel, now with Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland. “I think that’s the most powerful image he can deliver.”
His lawyer has said that Tourre’s e-mails to his girlfriend in 2007 showed he was uncertain about what he was doing and provided “an easy mark, a scapegoat” for the SEC.
Tourre has kept a low profile since enduring the questions of a U.S. Senate subcommittee in April 2010 alongside other Goldman Sachs executives. The firm later settled SEC allegations for $550 million, a record at the time. Tourre has spent part of the time since then volunteering in Rwanda and working on a doctorate in economics at the University of Chicago.
Yesterday, the SEC’s star witness in the trial told jurors that Goldman Sachs misled her into helping construct a doomed investment that Paulson was betting would fail.
Laura Schwartz, who headed ACA Management LLC’s asset management business in early 2007, testified that Goldman and Paulson led her to believe that the hedge fund wanted to invest, rather than take a short position, in a mortgage-backed security that lost $1 billion in the crash of the credit markets.
“Our understanding was that Paulson was the equity investor,” Schwartz said.