Tourre Says German Bank Didn't Invest In CDO

Sep 1 2011 | 11:36am ET

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.


In Depth

'Smart Beta' Funds In Regulators' Sights, Hedgies May Be Next

Mar 26 2015 | 11:11am ET

Funds that mimic strategies used by active managers for a fraction of the cost could...

Lifestyle

Study: Both Marriage and Divorce Lead to Negative Hedge Fund Performance

Mar 25 2015 | 6:51pm ET

Trouble at home leads to trouble in the market for fund managers, according to researchers...

Guest Contributor

Concerned About Your HFT Exposure? Hedge It!

Mar 26 2015 | 1:06pm ET

High-frequency trading has been a persistent storyline for several years. The trading...

 

Sponsored Content

    Mar 9 2015 | 6:35am ET

    Kelly RodriquesKelly RodriquesAs more investors look to diversify, many are beginning to use retirement funds to invest in alternative assets such as private equity and real estate. Kelly Rodriques, CEO & President of PENSCO Trust Company, explains how companies can connect with those looking to use their retirement accounts in a different way. Read more…

Editor's Note