Thursday, 24 July 2014
Last updated 12 hours ago
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."
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…