Ex-Paulson Exec Has Trouble Defining 'CDO' At Tourre Trial

Jul 17 2013 | 9:21am ET

Former Paulson & Co. executive Paolo Pelligrini's testimony at the trial of former Goldman Sachs banker Fabrice Tourre got off to an odd start on Monday when he stumbled over the definition of 'CDO.'

“I’m not sure,” Pellegrini said in response to a question from Matthew Martens, lead lawyer for the Securities and Exchange Commission in its case against Tourre, after what the New York Post characterized as “a long, uncomfortable pause.”

“It may stand for collateralized debt obligation, but I’m not sure.”

CDOs are at the heart of the SEC's civil suit against Tourre. The regulator alleges that Paulson, which has not been accused of any wrongdoing, had a hand in choosing the mortgage-backed securities that went into a Goldman CDO called Abacus. Paulson subsequently made a killing betting against the CDO. The SEC alleges Tourre lied to investors about Paulson's involvement in the construction of the product. Goldman has already paid $550 million to settle with the SEC.

Martens at one point asked Judge Katherine Forrest if he could treat Pellegrini as a hostile witness, a request the judge denied but said she might allow later.

Pellegrini testified that Paulson decided to short the mortgage-backed securities in 2006 based on its belief that “there would be a lot of mortgage defaults.”

Tourre's defense lawyer, Pamela Chepiga, told jurors her client "never misled anyone," and accused authorities of attempting to make him a scapegoat.

Pellegrini will resume testifying Wednesday. The trial is expected to last three weeks.


In Depth

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

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.