Ex-Goldman Sachs exec penalized in subprime investment case
Former Goldman Sachs Group Inc. Vice President Fabrice Tourre, found liable for his part in a failed $1-billion investment, was ordered to pay more than $825,000 in the U.S. Securities and Exchange Commission case.
U.S. District Judge Katherine Forrest in Manhattan ruled Wednesday that Tourre must pay $650,000 in civil penalties and give up $175,463 of his 2007 bonus, plus interest. He can’t seek reimbursement of the penalties from Goldman Sachs, the judge ruled.
Tourre, 35, was found liable Aug. 1 after a jury trial at which the SEC alleged he had intentionally misled investors in a subprime mortgage vehicle called Abacus 2007-AC1. Tourre lied about the role played by billionaire John Paulson’s Paulson & Co. hedge fund, which helped choose the securities underlying Abacus, then made a billion-dollar bet it would fail, the agency said.
The lawsuit was one of the government’s most prominent efforts to fix responsibility for the housing market crash, which helped precipitate the worst economic downturn since the 1930s. Critics have faulted the SEC for not doing more to police the abuses that helped lead to the crisis or to pursue top financial executives they say are responsible.
The SEC’s allegations against Tourre and Goldman Sachs helped spur Congress in 2010 to enact the Dodd-Frank Wall Street Reform and Consumer Protection Act, aimed at averting future crises.
The SEC requested a $910,000 penalty. Forrest declined to order Tourre, who is in the middle of a six-year economics doctoral program at the University of Chicago, not to violate federal securities laws in the future, finding that there’s no evidence he intends to return to Wall Street.
“I remain deeply grateful for the unwavering support of my family and friends as I consider potential next steps in the legal process,” Tourre said in a statement.
