Paulson To Testify In CDO Case

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.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

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

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

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.