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

Bob Doll's Ten Market Predictions For 2016

Jan 7 2016 | 9:37pm ET

Well-known market strategist Robert Doll has published his annual list of ten predictions...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedge Fund Marketing - Making the Most of Your Salesperson

Jan 20 2016 | 8:11pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth takes a close...