SEC Lawyer OKed Goldman CDO When Working For Paulson

Aug 2 2011 | 12:31pm ET

A lawyer for the Securities and Exchange Commission approved a controversial collateralized debt obligation before joining the agency, and may testify in the civil trial of the Goldman Sachs banker behind the deal.

Adam Glass served as outside counsel to hedge fund Paulson & Co. four years ago. In that role, he signed off on Abacus-AC1-2007, a $1 billion CDO which the SEC said was structured and marketed by Goldman on behalf of Paulson, which made a mint by shorting the CDO.

The SEC accused Goldman and banker Fabrice Tourre of misleading investors about the CDO, in particular about Paulson's role. The agency claims Paulson played "a significant role" in picking the mortgage-backed securities that went into Abacus, a claim Paulson denies, and that Goldman and Tourre failed to tell investors that the hedge fund was shorting the vehicle.

Paulson has not been accused of any wrongdoing in the case.

Goldman last year paid $550 million to settle the SEC case, but Tourre is fighting the allegations. In June, a judge ruled that the agency's case can proceed, but dismissed several claims against Tourre.

Glass, who joined the SEC two years ago, was deposed in the Tourre case over the summer, The New York Times reports. Now co-chief counsel helping to put together the SEC's derivatives regulations, Glass reviewed and commented on the engagement letter between Goldman and ACA Financial Guaranty, which insured and invested in the CDO, and also saw a draft of the offering circular for investors. Neither document referred to Paulson's alleged hand in picking the securities.

According to the Times, Glass did not push for additional disclosures about Paulson's role, although he did do so on some previous Goldman deals. But Glass, as Paulson's lawyer, did not have a fiduciary duty to Goldman's clients.


In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...

Lifestyle

Cooper-Hohn Won't Contest Divorce Settlement

Dec 18 2014 | 9:51am ET

The ex-wife of hedge fund billionaire Christopher Hohn will not contest a divorce...

Guest Contributor

Controlling With Confidence: A ‘How-To’ For Hedge Fund Managers

Dec 22 2014 | 11:52am ET

Hedge funds are increasingly turning to third party services to help with operations...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

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.