Wednesday, 30 July 2014
Last updated 7 hours ago
Jun 6 2013 | 11:28am ET
The former Goldman Sachs executive accused of defrauding investors in a Paulson & Co.-linked collateralized debt obligation will not face one of the claims against him at trial—but not the one he wanted.
U.S. District Judge Katherine Forrest granted the Securities and Exchange Commission's motion for partial summary judgment against Fabrice Tourre, finding that he violated securities laws by using the telephone or Internet to commit his fraud. At the same time, Forrest rejected Tourre's motion for partial summary judgment, in which his lawyers claimed that he could not be held liable in a U.S. court for foreign transactions under a 2010 U.S. Supreme Court ruling.
Tourre is accused of misleading investors in ABACUS-AC1 about Paulson's role in creating the CDO. According to the SEC, Paulson, which has not been accused of any wrongdoing, had a hand in selecting the securities that went into the $1 billion CDO, which it would make a killing shorting. Goldman settled the allegations against it for $550 million.
In finding for the SEC, Forrest ruled that it "must prove only that the offeror was in the United States at the time he or she made the relevant offer. The SEC has satisfied that burden. It has cited to record evidence that would allow a reasonable jury to find that Tourre worked in New York at all relevant times."
Tourre's trial is set to begin in six weeks, Forrest said. She wrote in her ruling, "The SEC essentially argues that Tourre handed Little Red Riding Hood an invitation to grandmother's house while concealing the fact that it was written by the Big Bad Wolf," while Tourre argues "the alleged victims were not be-hooded children, but rather large financial institutions, operating in a dog-eat-dog world."
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…