FORMER Goldman Sachs banker Fabrice Tourre will be appearing in court in New York today, on the first day of his civil trial.
Tourre, who once referred to himself in emails as “the fabulous Fab” is facing allegations he defrauded investors in a complex mortgage product called Abacus while he was working for the banking giant.
The 34-year-old – now a doctorate student – is no longer employed by Goldman, but the bank is paying his legal costs. If found liable he could be given financial penalties and be barred from working in the securities industry.
US regulator the Securities and Exchange Commission (SEC) argues that Tourre misled investors in a collateralised debt obligation (CDO) known as Abacus by failing to disclose that Paulson & Co, the hedge fund run by billionaire John Paulson, had helped to design its portfolio while planning to sell it short. Buyers including German bank IKB lost an estimated $1bn (£648m) when Abacus’ property loans turned toxic.
Tourre – who was made vice-president at the bank just days before he started working on the Abacus CDO – denies that any deception on his part ever took place.
However, in an email to his girlfriend on 23 January 2007 he wrote about the financial markets that: “[The] whole building is about to collapse anytime now” and “only potential survivor, the fabulous Fab, standing in the middle of all these complex, highly leveraged exotic trades.”
The bank was fined £17.5m by the Financial Services Authority in September 2010 for failing to alert British authorities to the SEC probe.
Tourre is expected to testify at the trial, which is being overseen by Judge Katherine Forrest.
TIMELINE: FROM TRADING FLOOR TO COURT
2004 – 2008
Goldman issues 25 mortgage deals known as Abacus, led by trader Fabrice Tourre.
16 APRIL 2010
The SEC accuses Goldman of defrauding investors by wilfully mis-marketing toxic sub-prime mortgage-related securities.
20 APRIL 2010
Tourre is stripped of his licence to operate in the City of London after he sent emails suggesting he knew that his “complex, highly leveraged, exotic trades” may collapse.
15 JULY 2010
Goldman agrees to pay $550m (£359.3m) in July 2010 to settle its part of the case, without admitting or denying wrongdoing.
10 SEPTEMBER 2010
The UK Financial Services Authority fines Goldman £17.5m for not alerting the British authorities to the SEC probe.
15 JULY 2013
Tourre is the only employee from Goldman Sachs to be named in the civil action trial which begins today in a New York court.