A former Goldman Sachs trader who earned the nickname “Fabulous Fab” has been found liable in a fraud case brought by US federal regulators in response to the 2007 mortgage crisis that helped push the US into recession.
A jury on Thursday reached the verdict at the civil trial in Manhattan Federal Court of Fabrice Tourre — a French-born Stanford graduate described by US Securities and Exchange Commission (SEC) lawyers as the face of “Wall Street greed.” Tourre’s attorneys portrayed him as a scapegoat in a downturn caused by larger economic forces.
Tourre, 34, was found liable in six of seven SEC fraud and other claims. He faces potential fines and a possible ban from the financial industry. The exact penalty will be determined at a future proceeding.
The commission had accused Tourre of misleading institutional investors about subprime mortgage securities that he knew were doomed to fail, setting the stage for a valued Goldman hedge fund client, Paulson & Co Inc, to secretly bet against the investment.
The maneuver ended up making US$1 billion for the hedge fund and its wealthy president, John Paulson, and millions of dollars in fees for Goldman. The SEC also sought to show that it helped earn Tourre a bonus that boosted his salary to US$1.7 million in 2007.
On the witness stand, the commission’s lawyers confronted Tourre with a January 2007 e-mail it said deliberately misled another institutional investor about Paulson’s short position in the investment called Abacus 2007-AC1.
Asked repeatedly if the information in the e-mail was “false,” Tourre responded: “It was not accurate.”
He added: “I wasn’t trying to confuse anybody; it just wasn’t accurate at the time.”
Leaving the courtroom on Thursday, SEC lawyer Matthew Martens said: “We’re obviously gratified by the jury’s verdict and appreciate their hard work.”
Tourre left the courthouse without speaking to reporters. His attorney also had no immediate comment.
In closing arguments, Martens called Tourre’s testimony “surreal, imaginary, unreal, dream-like” and told jurors that the defendant wanted them “to live in his imaginary land ... to live in a fantasy world.”
“Only if you close your eyes to the facts, you can find Mr. Tourre not liable for his actions,” the SEC lawyer said.
Tourre’s attorney, John Coffey, countered that the government had “unjustly accused him of wrongdoing.”
Coffey urged jurors to put the investment’s failure in perspective, noting that all similarly packaged securities “went off the cliff as well” after 2007.
The civil case had been called the most significant legal action related to the US mortgage securities meltdown, but it lacked the drama and high stakes of white-collar criminal cases. Much of the testimony was devoted to the intricacies of synthetic collateralized debt obligations, or CDOs — a complex type of investment central to the case.
Some of the testimony focused on a personal e-mail Tourre sent to his girlfriend in France. The SEC lawyers said the missive proved the hubris of a man at the center of a massive fraud, while the defense claimed was “an old-fashioned love letter” penned by a young trader who was full of self-doubt and angst over upheaval in the financial world.
Writing in French, Tourre said of the financial markets: “The whole building is about to collapse any time now.”
“Only potential survivor, the fabulous Fab... Standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”
Pressed by Marten on what he meant, Tourre said, “I didn’t create any monstrosities.”
Goldman settled with the SEC in 2010 by paying a US$550 million fine without admitting or denying wrongdoing. Tourre left the firm last year and is studying for his doctorate in economics at the University of Chicago.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San