Tourre Denies Wrongdoing, Says He Knew Paulson Might Short CDO

Jul 20 2010 | 12:39pm ET

The Goldman Sachs executive accused of defrauding investors in a collateralized debt obligation has denied any wrongdoing and called for the case against him to be dismissed.

Fabrice Tourre, the Goldman vice president who counted hedge fund Paulson & Co. among his clients and who is accused of misleading investors in the CDO about Paulson’s alleged role, filed his response to the SEC’s charges yesterday. He rejected the regulator’s charge that the marketing materials for the CDO, called ABACUS-2007-AC1, contained “incomplete information,” as Goldman itself acknowledged in its $550 million settlement last week.

Tourre, who is currently on administrative leave from Goldman, blasted the SEC’s evidence as “improperly vague, ambiguous and confusing,” and turned around to accuse the regulator of omitting “critical facts.” The 13-page reply also said the SEC failed to show that Tourre sought to defraud investors.

Tourre, whose legal bills are being footed by his employer, also pointed a finger at Goldman.

“Mr. Tourre, a French citizen and engineer by training, reasonably relied on Goldman Sachs’ institutional process to ensure adequate legal review and disclosure of material information, and cannot be held liable for any alleged failings of that process.”

The SEC accuses Tourre of misleading investors in the CDO, which was allegedly structured and marketed on behalf of Paulson. In particular, the regulator says the Goldman executive failed to disclose Paulson’s role in picking the securities that went into the CDO, which cost investors some $1 billion and made the hedge fund an equal amount, or that the hedge fund planned to short the CDO through credit default swaps bought from Goldman.

Tourre acknowledged in the filing that he knew Paulson “was considering taking some or all of the short side” of the CDO, but noted that the marketing materials made clear that a Goldman affiliate held a short interest in it and could transfer that interest.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.