Key Witness Says Tourre, Others Never Corrected Her About Goldman CDO

Jul 24 2013 | 12:00pm ET

A former executive at the firm that insured a controversial Paulson & Co.-linked collateralized debt obligation has testified that the former Goldman Sachs executive accused of fraud misled her about the deal.

Laura Schwartz told the jury in the Fabrice Tourre case that while Tourre himself never told her that Paulson—which shorted the CDO, ABACUS-2007-AC1—was actually a long investor in the vehicle, he was present at meetings and on e-mail threads that affirmed her belief that "Paulson would be the equity investor in the transaction."

Schwartz said that her misapprehension was never corrected, despite numerous opportunities.

The SEC alleges that Paulson—which has not been accused of wrongdoing—helped select the securities that went into the CDO. Schwartz's former employer, ACA Financial Guaranty, which both insured and invested in the CDO, was officially the selection agent.

Schwartz, who was under investigation herself by the SEC, which recently decided not to press charges, was pushed by Tourre's lawyer who asked about ACA's mortgage-bond evaluation process and played for the jury a 2006 conference call in which she called ACA's long/short strategy in CDOs "excellent."


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...