The Securities and Exchange Commission can’t sue Fabrice Tourre over a Goldman Sachs Group Inc. deal involving collateralized debt obligations because the transaction wasn’t in the U.S., his lawyers told a judge.
The U.S. Supreme Court ruled in June that U.S. securities laws don’t apply to claims of foreign buyers of non-U.S. securities on foreign exchanges, lawyers for the Goldman executive director said in a court filing yesterday. The collateralized debt obligations known as Abacus at issue in the SEC’s complaint weren’t listed on any exchange and the sole investor in the notes was a foreign bank that purchased them overseas, according to the filing.
The transaction “was not subject to the antifraud provisions of federal securities laws,” according to the filing in federal court in Manhattan. “The complaint’s failure to allege that any Abacus 2007-ACI transaction took place in the United States requires dismissal.”
In August and September, the SEC turned over 10 million pages of documents from its investigation to Tourre’s lawyer that show that IKB Deutsche Industriebank AG, based in Dusseldorf, Germany, bought the CDOs, known as the Abacus transaction, outside the U.S., according to Tourre’s filing.
John Nester, an SEC spokesman, declined to comment. Pamela Chepiga, a lawyer for Tourre, didn’t immediately return voice-mail and e-mail messages seeking comment after regular business hours yesterday.
The SEC sued Goldman Sachs and Tourre in April over claims the firm misled investors in the CDOs linked to subprime mortgages.
Tourre, the only Goldman Sachs executive sued individually, remains a defendant in the case after the firm agreed to a $550 million settlement in July. Fiona Laffan, a Goldman Sachs spokeswoman, said Sept. 9 that Tourre “remains an employee on paid leave.”
The case is SEC v. Goldman Sachs, 10-CV-3229, U.S. District Court, Southern District of New York (Manhattan).