* Paulson hedge fund benefited by shorting Abacus CDO
* SEC seeking $1.15 million, including fine, from Tourre
NEW YORK, Jan 7 (Reuters) - Fabrice Tourre, a former Goldman Sachs Group Inc vice president who was found liable for defrauding investors over a failed mortgage transaction, has failed to persuade a federal judge to dismiss the case or give him a new trial.
U.S. District Judge Katherine Forrest in Manhattan on Tuesday said jurors did not make a mistake on Aug. 1 in finding Tourre liable on six of the seven civil charges brought by the U.S. Securities and Exchange Commission.
Tourre had been accused of engineering a 2007 transaction that enabled a hedge fund run by billionaire John Paulson to reap a big profit while costing investors $1 billion in losses.
He argued that his conduct did not amount to fraud, that there was a lack of evidence to support such a finding, and that Forrest had instructed jurors incorrectly on the law.
"None of these arguments has merit," the judge concluded.
Forrest is still reviewing an SEC request that Tourre pay $1.15 million, including a $910,000 fine, as punishment. Goldman is paying his legal fees, and an appeal is possible after a penalty is assessed.
Pamela Chepiga, a partner at Allen & Overy representing Tourre, was not immediately available for comment.
SEC spokesman John Nester said: "We are pleased with the decision."
Tourre has become a symbol of the 2008 financial crisis, in part because of an email where he referred to himself as "fabulous Fab." The SEC case remains one of the government's biggest legal victories over conduct said to have contributed to the crisis.
While many individuals have been sued by the SEC and other regulators, few have gone to trial. The SEC has not charged any senior executives at major banks, and Tourre has argued that the regulator made him a scapegoat.
Jurors had found Tourre liable for misleading investors in the 2007 synthetic collateralized debt obligation Abacus 2007-AC1 by concealing how Paulson had helped construct the transaction and bet it would fail.
They also said Tourre misled ACA Capital Holdings Inc, which also chose assets for Abacus, into believing Paulson's firm would be an equity investor in the CDO.
Tourre claimed that several charges should be dismissed because they were premised on the charge on which he was held not liable, but the judge disagreed.
"The bottom line is that Tourre and Goldman Sachs designed a transaction with Paulson to enable Paulson to short a weak quality portfolio of residential mortgage-backed securities," Forrest wrote.
"A jury could reasonably infer that informing the long investors that ACA had selected the portfolio - while leaving out that Paulson was a short and had also selected the portfolio - was a necessary part of making the fraudulent scheme a success," she added.
Forrest also rejected Tourre's claim that there was no evidence that Abacus influenced his salary or bonus.
She also said jurors could reasonably conclude that Abacus qualified as a "domestic" transaction under the 2010 Supreme Court precedent, Morrison v. National Australia Bank Ltd, to justify liability under U.S. securities laws.
Goldman agreed in a July 2010 settlement with the SEC to pay $550 million over Abacus, without admitting wrongdoing. Tourre later began pursuing a doctorate in economics at the University of Chicago.
The case is SEC v. Tourre, U.S. District Court, Southern District of New York, No. 10-03229.