Tuesday, 22 July 2014
Last updated 3 hours ago
Jul 23 2013 | 2:41pm ET
Paulson & Co. founder John Paulson will take the stand in the civil fraud trial of a former Goldman Sachs executive accused of misleading investors about the hedge fund's role in crafting a controversial collateralized debt obligation.
Paulson could be called to testify on Aug. 1 at the trial of Fabrice Tourre, U.S. District Judge Katherine Forrest said on Friday. His testimony would follow that of former Paulson executive Paolo Pellegrini, who testified last week.
Tourre is expected to testify himself in the case, in which he is accused of lying to investors in a 2007 CDO, ABACUS-AC1, about Paulson's role in selecting the securities that went into the $1 billion deal. Paulson made a killing shorting the vehicle; the hedge fund has not been accused of any wrongdoing in the case.
Over the past two days, a former colleague of Tourre's at Goldman heaped praise on the young executive—at the behest of the Securities and Exchange Commission, which brought the charges against Tourre. Gail Kreitman said she was "very impressed" with Tourre's knowledge about CDOs and that he was a "trusted member of my team that I respected."
Kreitman told a representative of ACA Financial Guaranty, which both invested in and insured the ABACUS CDO, that Paulson's investment in it would be long. Kreitman said she couldn't remember who gave her the information that led to the incorrect assertion, but the SEC sought to use her glowing reports of Tourre's competence to convince the jury that it was him.
Kreitman said she dealt primarily with Tourre and another Goldman employee on the deal. Of the former, she said, "I do not remember any instance when he was not responsive and helpful."
Also testifying yesterday was the former president of ACA's holding company, Alan Roseman, who told the jury that Paulson's involvement in ABACUS on the long side was "critical" in his own firm's decision to participate.
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…