Tourre Says He Never Said Paulson Was Long CDO

Jul 26 2013 | 11:23am ET

Lawyers on both sides of the Fabrice Tourre fraud trial sought yesterday to parse the former Goldman Sachs executive's words to paint dueling pictures of the 34-year-old.

Tourre, who has been sued by the Securities and Exchange Commission for misleading investors in a $1 billion collateralized debt obligation, spent his second day on the witness stand yesterday, totaling six hours of questioning.

SEC lawyer Matthew Martens walked Tourre through a series of phone calls, e-mails and meetings about the CDO, ABACUS-2007-AC1, to show that Tourre consistently failed to clarify the impression that Paulson & Co., which is not accused of any wrongdoing, planned to take a long position on the CDO. In fact, Paulson, which the SEC alleges had a role in selecting the securities in the CDO, planned to short it all along.

Tourre has said that he alerted at least one person at ACA Financial Guaranty, the company that insured and invested in the CDO, that Paulson would short the instrument. But no witness has corroborated that claim.

Regarding the famous "fabulous Fab" e-mail, in which Tourre wrote that "the whole building is about to collapse anytime now," Tourre said it was a "silly, romantic e-mail I sent late at night during a period of market stress… to my girlfriend," who also worked at Goldman.

Martens cited several other e-mails in which Tourre appeared to take a dim view of the mortgage-backed securities market, including one in which he wrote that he "loved" the Web site mortgageimplode.com.

On cross examination, Tourre told his lawyer that he was "here to tell the truth and clear my name." He told the jury about his childhood and longtime ambition to move to the United States, before moving to the heart of the matter."

"At any time during the structuring of the ABACUS-2007-AC1 transaction, did you tell anyone that Paulson was buying equity in the ABACUS-2007-AC1 transaction?" his lawyer, Pamela Chepiga, asked.

"No," Tourre said.

Tourre's testimony is set to resume today.


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