Goldman executive denies fraud
Goldman on Thursday agreed to pay $550 million to settle civil fraud charges brought in April by the U.S. Securities Exchange Commission, which said it planned to continue its lawsuit against Tourre, a Frenchman accused of putting the product, known as “Abacus 2007-AC1” together.
In a filing on Monday with the U.S. District Court in Manhattan, Tourre’s lawyers said he “cannot be held liable for any misrepresentations or omissions that he did not make.”
It also said “the purported claims against Mr. Tourre are based solely on alleged actions and omissions concerning information known to many different Goldman Sachs employees working in various aspects of its business, including Legal, Compliance, sales and trading.”
A spokesman for the SEC declined to comment. A spokesman for Goldman Sachs could not immediately be reached to comment.
The SEC civil fraud lawsuit rattled the bank’s clients and investors, but the settlement announced on Thursday sent the stock soaring by 9 percent. On Monday, the firm’s shares closed down 0.36 percent at $145.68.
The response of Tourre, currently an executive director of Goldman Sachs International in London, also denied SEC allegations that hedge fund Paulson & Co played a significant role in the selection of the product’s portfolio.
His court filing denied the allegations “including specifically that those allegations completely and accurately characterize the offering materials for ABACUS 2007-AC1 or the credit default swaps (“CDS”) between Paulson & Co, Inc. (“Paulson”) and Goldman, Sachs & Co (“Goldman Sachs”), and respectfully refers the Court to those documents for a complete and accurate statement of their contents.”
Tourre, who has testified before a U.S. congressional committee on the civil charges, was vice president on Goldman’s structured products correlation trading desk in New York from 2005 to 2008.
The SEC complaint “fails to plead fraud with particularity” and “fails to allege the existence of any material misstatement or omission,” Monday’s response said, employing typical language in defending such a case.
“The purported claims against Mr. Tourre and the allegations upon which they are based are improperly vague, ambiguous and confusing, and omit critical facts,” the court document said.
On Thursday, the SEC said the $550 million Goldman would pay, still subject to the approval of a federal judge in New York, was the largest ever for a financial institution.
Many investors viewed the settlement as only a slap on the wrist for a bank that earned more than $13 billion last year.
The case is SEC v Goldman Sachs et al, U.S. District Court for the Southern District of New York, No. 10-3229.