Be happy now, because this may be the one and only big time Wall Street Criminal to
see the inside of a prison cell be made to pay for his criminal naughty behavior - maybe. A New York jury has convicted found Fabrice Tourre, former Goldman Sach's trader, liable for fraud involving One BILLION DOLLARS in losses from the sale of synthetic collateralized debt obligations that made Goldman Sachs billions in profits as they shorted the deals even while promoting them to their clients. The jury in the civil suit brought by the SEC agreed with the SEC lawyer Matthew Martens, that "Fabulous Fab" was guilty as hell:
Jurors found that the trader, who nicknamed himself "Fabulous Fab", had defrauded investors in the run up to the global financial crisis in 2008.
A complex mortgage deal he was involved in cost investors $1bn (£661m) when it failed.
So what is his potential punishment? Glad you asked:
Because the case is civil rather than criminal, he faces possible fines and a ban from the financial services industry.
Big whoop-di-do! By the way, for those who don't remember Mr. Fabrice Tourre, her's a little review lesson on what exactly he did, which in any legitimate justice system would result in the loss of all his assets and imprisonment for twenty years, along with the conviction of hundreds of other of his Wall Street cronies. Alas, we don't have that kind of justice system in this country:
Paulson & Co. hired Goldman Sachs to create a mortgage product that they could bet against the housing market in 2007. Martens and the SEC alleged in court that Tourre committed fraud by not telling some investors about Paulson's strategy. He also did not inform them that Paulson picked securities that were included in the mortgage portfolio. These half-truths earned Goldman Sachs $1 billion off this scheme.
And here's more detail about this "Fabulous" bad boy and his partners in crime at Goldman, specifically Jonathan M. Egol, at that time a managing director at Goldman Sachs:
Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits. [...]
Mr. Egol was a prime mover behind these securities. Beginning in 2004, with housing prices soaring and the mortgage mania in full swing, Mr. Egol began creating the deals known as Abacus. From 2004 to 2008, Goldman issued 25 Abacus deals, according to Bloomberg, with a total value of $10.9 billion.
Abacus allowed investors to bet for or against the mortgage securities that were linked to the deal. The C.D.O.’s didn’t contain actual mortgages. Instead, they consisted of credit-default swaps, a type of insurance that pays out when a borrower defaults. These swaps made it much easier to place large bets on mortgage failures. [...]
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers. “They saw the writing on the wall in this market as early as 2005.” By creating the Abacus C.D.O.’s, they helped protect Goldman against losses that others would suffer.
As early as the summer of 2006, Goldman’s sales desk began marketing short bets using the ABX index to hedge funds like Paulson & Company, Magnetar and Soros Fund Management, which invests for the billionaire George Soros. John Paulson, the founder of Paulson & Company, also would later take some of the shorts from the Abacus deals, helping him profit when mortgage bonds collapsed.
Too bad for Fabrice that his buddy, Mr. Ebol escaped liability, mostly because Goldman sold Patrice out by releasing damaging emails he sent regarding the Abacus deals, like this one:
"Just made it to the country of your favorite clients [Belgians]!!! I'm managed to sell a few abacus bonds to widows and orphans that I ran into at the airport..."
Yes, widows and orphans. Hahahahaha. Very funny. Tourre made a $2 million fee on the sale of the fraudulent Paulson Abacus deal, alone. Not a bad day's work for a thief who bragged about stealing money from pension funds on which, yes, widows and other retirees rely upon to make ends meet. Hell, most armed robbers would be thrilled to come away with such a haul and face no threat of arrest or imprisonment. Guess they should have studied harder in math class in school. That's what the real criminal masterminds do these days.
And now the SEC has Patrice Tourre's pelt on it's wall (figuratively speaking), the proverbial scapegoat has been sacrificed and business can return to normal. Oh wait, it already has for Goldman Sachs:
FORTUNE -- Goldman Sachs's profits in the second quarter more than doubled from a year earlier to $1.9 billion, propelled by a surge in stock and bond offerings. Trading revenues were up as well from a year ago, but down from the first quarter ...
Goldman itself appeared to be able to capitalize on the improving U.S. economy and the rising stock market. Fees from stock market underwriting and trading rose 55% and 25% from the same period a year ago. Bond market underwriting fees were also up 40%. And Goldman's own equity investments, some of which are in private companies, generated an additional $500 million in gains in the quarter.
Are you happy now? Yeah, me neither.