U.S. SEC to jurors: Don't follow Tourre to 'land of make believe'
NEW YORK, July 30 (Reuters) - Former Goldman Sachs trader Fabrice Tourre should not be allowed to get away with deceiving investors in a mortgage deal that went bad in the financial crisis, an SEC lawyer told jurors who will decide a civil fraud lawsuit brought by the regulatory agency.
On the final day of a more than two-week trial, U.S. Securities and Exchange Commission lawyer Matthew Martens said to the jurors that the one-time Goldman Sachs Group Inc vice president sold investors on a "land of make believe" that cost them $1 billion.
"Now Mr. Tourre wants you to live in that land as well," Martens said.
The arguments came in the SEC's closing salvo in what has become the highest-profile trial stemming from its investigations of the 2008 financial crisis.
The trial centers on a synthetic collateralized debt obligation based on subprime mortgage securities known as Abacus 2007-AC1.
The SEC sued Tourre in 2010, accusing him of not telling investors in Abacus that the hedge fund of billionaire John Paulson helped pick the mortgage securities in the deal or that the hedge fund planned to bet against Abacus.
The SEC also accused Tourre of misleading ACA Capital Holdings Inc, a company hired to select the securities, into thinking Paulson & Co Inc was an equity investor in the synthetic collateralized debt obligation.
Paulson made around $1 billion shorting, or wagering against, Abacus, while investors lost about the same amount.
In closing arguments by the defense, lawyer Sean Coffey depicted his client as a "remarkable young man" facing an "unjust charge."
Coffey said that telling investors ACA selected the securities was not a "half truth," as Martens had put it earlier on Tuesday.
It was common at the time not to mention the role investors played in putting together collateralized debt obligations, Coffey said. Instead, only the role of portfolio selection agents like ACA was highlighted, he said.
Coffey said it also wasn't believable that ACA did not know Paulson would short Abacus. Coffey pointed to a series of news reports about Paulson's strategy of betting against the U.S. housing market, some of which were received by executives at ACA.
"This company lived or died by how it monitored the subprime housing market," Coffey said.
Tourre, dressed on Tuesday in a black suit and purple tie, proceeded to trial alone after Goldman Sachs, initially a co-defendant, agreed in July 2010 to pay $550 million to settle the case without admitting or denying wrongdoing.
His defense team decided on Monday to call no witnesses, which legal experts said was a sign that they believed that the SEC had failed to prove its case.
In summing up the SEC's case on Tuesday, Martens said Tourre engaged in "a $1 billion fraud to feed Wall Street greed."
Tourre had not just sought to mislead investors but also the five women and four men on the jury, Martens said.
For years, Tourre said he couldn't remember why he described a meeting he attended between ACA and Paulson as "surreal," yet after being shown documents by his lawyer last week, said it referred to Paulson's separate strategy of betting against Wall Street banks at the time.
"He got on the witness stand and tried to deceive you," Martens said.
Coffey rejected that charge, saying it is "not unusual at all to show a document to a witness to refresh their recollection."
The case is SEC v. Tourre, U.S. District Court, Southern District of New York, No. 10-03229.