SEC Case Against Goldman's Tourre Can Proceed

Jun 13 2011 | 12:15pm ET

Goldman Sachs executive Fabrice Tourre, the only individual accused in the collateralized debt obligation case that cost Goldman a $550 million settlement last year, will have to defend himself against a slimmed-down Securities and Exchange Commission lawsuit, a judge has ruled.

U.S. District Judge Barbara Jones ruled that, "by virtue of alleging Tourre was principally responsible for" ABACUS-AC-1, the $1 billion CDO at the center of the lawsuit, "and its marketing materials, the SEC sufficiently alleges that Tourre" broke the law and "knowingly, recklessly or negligently" misrepresented the CDO to clients. But she threw out several claims in the wake of a U.S. Supreme Court ruling last year denying U.S. legal protection to foreign investors who buy securities abroad.

The SEC alleges that ABACUS was structured and marketed on behalf of hedge fund Paulson & Co., which has not been accused of any wrongdoing. Goldman and Tourre were accused of misleading investors about Paulson's role—the regulator claims that Paulson had a hand in selecting the securities that went into the CDO, which it would make a killing shorting.

The mixed ruling allowed both sides to claim victory, with both saying they were "pleased."


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Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

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