By Dow Jones Business News,
January 22, 2014, 07:43:00 AM EDT
By Justin Baer
Former Goldman Sachs Group Inc. trader Fabrice Tourre argued that securities regulators should impose a fine of
only as much as $65,000 for the securities fraud allegations for which he was found liable last year.
In court papers filed Tuesday, Mr. Tourre's lawyers said a federal jury's verdict, which found him liable for six
counts of securities fraud for his role in creating a mortgage-linked deal that imploded during the financial crisis,
didn't conclude he caused losses by investors in the security.
The Securities and Exchange Commission, which won the closely watched civil trial last summer, asked the federal
judge presiding over the case to impose a penalty of $910,000 on Mr. Tourre. The regulator also is asking that Mr.
Tourre repay gains of $175,463 as well as $62,858 in interest.
Mr. Tourre's lawyers also included in its papers a declaration from Daniel Sparks, a former Goldman executive who
ran the Wall Street firm's mortgage business when Mr. Tourre worked there, rejecting the SEC's claim that the one-time
trader's 2007 bonus was linked to Abacus 2007-AC1--the mortgage deal at the heart of the complaint.
Mr. Tourre made $1.7 million in 2007, the year Abacus closed. At the time, he was 28 years old.
"Contrary to the SEC's mathematical (but arbitrary and ill-founded) approach, Mr. Sparks explains that the setting
of bonuses at Goldman was a subjective process," Mr. Tourre's lawyers wrote. "As the mortgage department earned record
profits in 2007, Mr. Sparks explains that the setting of bonuses that year was even 'more arbitrary than in prior
"Moreover, Mr. Sparks explains that there was no "`specific mathematical relationship between Mr. Tourre's
compensation and the desk's profitability.'"
U.S. Judge Katherine Forrest must now rule on the penalty the SEC may impose on Mr. Tourre. He may then begin the
process of appealing the jury's verdict against him.
The SEC sued Mr. Tourre and Goldman in 2010 for their roles in creating and marketing Abacus. Goldman settled the
SEC's complaint within months, agreeing to pay a $550 million fine without admitting or denying wrongdoing. But Mr.
Tourre rejected a deal from the regulator, setting the stage for his 2013 trial.
The SEC's case centered on a complex mortgage deal between sophisticated investors, and whether Mr. Tourre misled
them on the role that New York hedge fund Paulson & Co. would play in that instrument.
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