The Goldman Sachs executive charged with defrauding investors in a collateralized debt obligation allegedly structured and marketed on behalf of Paulson & Co. says the Securities and Exchange Commission has at least one thing all wrong.
The SEC, which sued Fabrice Tourre at the same time as it sued his employers, who eventually settled for $550 million, claims that Tourre misled German bank IKB Deutsche Industriebank. But Tourre, in a court filing yesterday, said that IKB didn't make the $150 million investment in the CDO, ABACUS-2007-AC1, that the SEC says it did.
"Discovery in this matter thus far has shown, however, that IKB's alleged $150 million investment was, in fact, made by" Loreley Financing (Jersey) No. 29 and Loreley Financing (Jersey) No. 30. IKB set up the Loreley Companies in the Channel Islands to invest in asset-backed securities, but legally served only as an investment adviser to them, Tourre claims, "in which capacity IKB could only recommend to the directors of the Loreley companies that they enter into securities transactions."
Tourre is seeking permission to take testimony from witnesses at the two companies; in his filing, he claims that the factual record submitted by the SEC includes almost no evidence relating to the Loreley companies.
In June, a federal judge threw out some of the claims relating to IKB and ABN Amro, citing a recent Supreme Court ruling that U.S. securities laws don't cover foreign transactions involving foreign buyers. Tourre, who is based in London, has maintained that the Abacus transaction took place abroad, while the SEC said it occurred in New York.
The SEC alleges that Tourre sought to hide from IKB, ABN and ACA Management Paulson's role in selecting the securities that went into Abacus. Paulson, which has not been charged with any wrongdoing, denies having picked the securities.