Paulson tells investors he was open about subprime market

David Hellier
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PAULSON, the hedge fund that was the counterparty to the deal for which Goldman Sachs has been accused of fraud, has moved to head off investor concerns about its role.

Goldman is accused of defrauding investors by allegedly failing to make it clear to them that prominent hedge fund manager John Paulson bet against a Goldman subprime debt product that he helped design.

In a conference call yesterday and preceded by a letter to investors late on Tuesday, Paulson told investors that it was “transparent and open” about its bearish view of the mortgage market and its bets against a subprime mortgage product at the centre of the SEC case were completely above board. Paulson has not been charged by the SEC in connection with the case. But the planned IPO of Propel Multi-Strategy Fund, an investment that gives access to two funds advised by Paulson, has been delayed.

Fabulous Fab and Blankfein are pencilled in for Senate grilling
THE Goldman Sachs executive named by US authorities in their fraud writ will break his silence when he appears before a Congressional committee.

Fabrice Tourre is expected to be accompanied by Goldman chief executive Lloyd Blankfein when he faces the Senate’s subcommittee on investigations next Tuesday.

The 31-year-old Frenchman, who called himself the “fabulous Fab” in an email, has so far remained quiet over the affair. He is on paid leave and was de-registered with the FSA this week.

While it is not known what testimony Tourre and Blankfein will deliver, they are expected to stage a robust defence of their actions. Goldman has consistently rebutted allegations it tricked investors into buying a toxic mixture of sub-prime mortgage assets designed by a hedge fund that was betting they would implode.

The decision to put the pair in the spotlight marks a strategic change of direction for Goldman. Blankfein was notably absent from the firm’s first quarter conference call just days ago.