The lawyer leading the U.S. Securities and Exchange Commission’s case against ex-Goldman Sachs Group Inc. (GS) trader Fabrice Tourre said a series of e-mails Tourre sent in 2007, including one calling himself “Fabulous Fab,” are important to prove he intended to commit fraud.
“There’s no other way to tell his state of mind, other than what he was writing at the time,” Matthew Martens, the SEC lawyer, told U.S. District Judge Katherine Forrest in a hearing today in Manhattan.
Martens told Forrest the SEC plans to use the e-mails in its opening statement in the trial, set to begin July 15. Tourre is defending civil claims that he misled investors in Abacus 2007-AC1, a synthetic collateralized debt obligation tied to home mortgages.
John “Sean” Coffey, a lawyer for Tourre, argued today that the e-mails, which Tourre sent to his girlfriend in London, were personal and have nothing to do with the issues in the trial. In one, Tourre called himself “Fabulous Fab,” citing a friend’s nickname for him.
The trial comes three years to the day after the SEC announced Goldman Sachs’s agreement to pay a $550 million settlement and admit mistakes in marketing Abacus.
In a Jan. 23, 2007, e-mail, Tourre forwarded to his girlfriend, Marine Serres, an article warning of a possible bubble in overleveraged credit markets. Alternating between English and French, Tourre wrote: “More and more leverage in the system, the whole building is about to collapse anytime now… Only potential survivor, the fabulous Fab... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!”
In a later e-mail, Tourre called the complex derivatives he was selling “a product of pure intellectual masturbation” and likened a CDO to a “little Frankenstein turning against his own inventor.”
“These e-mails were personal e-mails that I deeply regret,” Tourre said in 2010.
The case is SEC v. Tourre, 10-cv-03229, U.S. District Court, Southern District of New York (Manhattan).
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