GOLDMAN Sachs has stood firm behind the man at the centre of the storm over the $1bn (£651m) fraud allegations against it, adding that he may even turn up to work in London this morning as normal.
Goldman said the status of Fabrice Tourre was unchanged after he was named in two counts of securities fraud brought against the bank by the US Securities and Exchange Commission (SEC) on Friday.
“Tourre has not been suspended and we don’t believe he has done anything wrong,” a spokeswoman said. “It will be his personal decision as to whether he wishes to take a few days away at this difficult time.”
Elizabeth Robertson, partner at Addleshaw Goddard, said: “The era of large firms throwing individuals to the wolves and washing their hands of these kind of charges is over.”
The SEC alleges that Goldman misled investors as to the level of risk associated with a synthetic collateralised debt obligation (CDO) transaction struck just before the collapse of the sub-prime mortgage bubble.
It said Goldman’s marketing materials for the “Abacus” portfolio were “false and misleading” because they did not mention that short investor John Paulson had played a significant role in the selection process.
Goldman, which is braced for another political onslaught this week as it prepares to announce first-quarter profits of nearly $4bn tomorrow, strenuously denies the claims. It said: “The SEC’s complaint accuses the firm of fraud because it didn’t disclose to one party of the transaction who was on the other side of that transaction. As normal business practice, market makers do not disclose the identities of a buyer to a seller and vice versa.”
Goldman, which lost a net $75m on the transaction, insisted that it never represented to investors that Paulson was going to be a long investor. It also said that all synthetic CDO transactions necessarily include both a long and short side and that all of its investors knew that.
The case is widely seen on Wall Street as part of a strategy to up the pressure on politicians to agree to the toughest possible regulatory crackdown on banks. US legislators, led by US Treasury Secretary Timothy Geithner, are currently putting the finishing touches to a controversial financial reform bill.
Gordon Brown yesterday accused Goldman of “moral bankruptcy”. The case may also spark a separate legal action from RBS, which took a $840.9m hit on the CDO portfolio after it acquired ABN Amro in late 2007.
Tourre, who has engaged Allen & Overy partner Pamela Chepiga to defend him, relocated to London from New York in 2008.