It took Matthew Marshall Taylor less than three months to land a job at Morgan Stanley (MS) after Goldman Sachs Group Inc. (GS) disclosed in a public filing that he had been fired for building an “inappropriately large” proprietary trading position.
Taylor was accused Nov. 8 by the U.S. Commodity Futures Trading Commission of concealing an $8.3 billion position in 2007 that caused Goldman Sachs to lose $118 million.
Goldman Sachs fired Taylor in December 2007 and cited “alleged conduct related to inappropriately large proprietary futures positions in a firm trading account,” in a so-called U-5 form, according to a Financial Industry Regulatory Authority document. Morgan Stanley, which had employed Taylor before he joined Goldman in 2005, re-hired him in March 2008, according to the records.
Morgan Stanley hired Taylor after a subprime mortgage- related trading position resulted in a $9.4 billion writedown in December 2007, which caused the New York-based company to oust co-president Zoe Cruz and sell a $5 billion stake to state- controlled China Investment Corp.
Taylor, who handled client-related equity derivative trading at Morgan Stanley, left the firm in July, said Mark Lake, a company spokesman in New York. Taylor’s departure wasn’t related to the CFTC complaint filed against him Nov. 8, said a person familiar with the situation who asked not to be identified because the information was private.
According to the CFTC complaint filed in federal court in Manhattan, Taylor concealed his position by bypassing the firm’s internal system for routing trades to the Chicago Mercantile Exchange and manually entering fabricated futures trades in a different internal system.
Goldman Sachs, which wasn’t identified in the CFTC lawsuit, said Taylor made the trades while employed at the firm.
“Matt Taylor provided false explanations when confronted about irregularities we detected in his account during the Dec. 14, 2007, trading day,” Michael DuVally, a Goldman Sachs spokesman, said in an e-mailed statement. “He admitted his misconduct following the market close, and was promptly removed from his job and terminated soon thereafter.”
“Since these events, which had no impact on customer funds, we have further enhanced our controls,” DuVally said.
The bank is negotiating with the CFTC to resolve an inquiry related to Taylor’s actions, according to people briefed on the situation, who requested anonymity because the talks aren’t public.
Taylor, a resident of Royal Palm Beach, Florida, was a vice president and trader on the Capital Structure Franchise Trading desk of his employer, according to the CFTC complaint.
The claim against him seeks a penalty of $130,000 or triple Taylor’s monetary gain for each violation, whichever is higher.
Taylor’s lawyer, Ross Intelisano of New York, said his client denied all the allegations and is disappointed that the CFTC filed a complaint.
“Matt never intentionally entered ‘fabricated trades’ to conceal any trading activity and Goldman never alleged he did so at the time of his termination or thereafter,” Intelisano, of Rich, Intelisano & Katz LLP, said in an e-mailed statement. “Matt, himself, brought the trading losses to the attention of senior managers at Goldman on the day they occurred.”
CFTC said in its complaint that by Dec. 13, 2007, “Taylor’s scheme culminated in his concealment of a notional value of an approximately $8.3 billion long e-mini futures position.” E-minis are futures contracts tied to the S&P 500 Index.
The CFTC seeks a penalty of $130,000 or triple Taylor’s monetary gain for each violation, whichever is higher.
The case is U.S. Commodity Futures Trading Commission v. Taylor, 12-cv-8170, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporters on this story: Christine Harper in New York at firstname.lastname@example.org; Joel Rosenblatt in San Francisco at email@example.com; Bob Van Voris in New York at firstname.lastname@example.org