In an opinion today, Judge Forrest denied the motion of former Goldman Sachs banker Fabrice Tourre for a new trial of SEC charges that he helped conceal from investors that a mortgage security was constructed, in part, by a hedge fund that was run by John Paulson and that was betting against the transaction. She found there was sufficient evidence for the jury’s verdict:
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 mortgaged-backed securities; in order to do that, they needed another party (ACA) to take the other side of the transaction. The record is replete with emails sent by Tourre and his colleagues, conversations which either happened or didn’t happen, and meetings at which ambiguity was left ambiguous. The jury could reasonably infer from this record evidence that the entirety of Tourre’s conduct in connection with the AC1 transaction constituted part of a scheme to support ACA’s belief that Paulson was a long investor. Similarly, based on the proof at trial, 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.
Judge Forrest also found that there was sufficient evidence to prove the essential element that Mr. Tourre obtained “money or property” by means of the alleged fraud:
Section 17(a)(2) does not require the SEC to show that a banker like Tourre received some sort of additional “fraud bonus” on top of his base salary in order to establish liability; as the statute clearly states, the SEC must prove that Tourre obtained money or property by means of a material misstatement or omission. Tourre ignores the fact that the evidence adduced at trial showed that he was paid by Goldman Sachs for his work during the time period covering the AC1 transaction, and that Tourre’s work on the AC1 transaction was within his job responsibilities. There was no evidence at trial that Tourre would have been paid nothing — or even anything less — had he not engaged in the work he performed on the AC1 transaction. Tourre chose not to put on a case. He could have called a witness to testify that even in the absence of the AC1 transaction his compensation would have been the same. He did not. Under these circumstances, the jury was fully entitled to draw the reasonable inference that Tourre obtained base salary and bonus by means of material misstatements or omissions.