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

Malik: The Science of Deal Sourcing 201

Aug 27 2015 | 5:35pm ET

Deal sourcing is understandably a hot topic among private equity firms because it...

Lifestyle

Rolling Art Advisors Marketing Collectible Car Fund As Uncorrelated Alternative

Aug 27 2015 | 6:47pm ET

A new fund is trying to provide investors with greater access to an emerging asset...

Guest Contributor

Agecroft Partners: Hedge Fund Industry Assets to increase $250B by Summer 2016

Aug 11 2015 | 11:29am ET

Assets will continue to flow into the hedge fund industry despite long-standing...

 

Editor's Note