A federal judge in New York scheduled a hearing for Feb. 14 on Goldman Sachs Group Inc. trader Fabrice Tourre’s bid to dismiss a U.S. Securities and Exchange Commission lawsuit that accuses him of misleading investors.
Tourre denies wrongdoing and is asking U.S. District Judge Barbara Jones to throw out the agency’s amended complaint. The revised complaint fails “utterly to remedy the fatal defects in the original complaint,” Tourre said in a December filing.
The SEC sued New York-based Goldman Sachs and Tourre on April 16, accusing them of failing to tell investors that hedge fund Paulson & Co. helped pick underlying securities for a collateralized debt obligation linked to subprime mortgages and planned to bet against them. The SEC reached a $550 million settlement with New York-based Goldman Sachs in July.
Because the transactions occurred outside the U.S., Tourre argued, he can’t be held liable under U.S. securities law.
The U.S. Supreme Court ruled in June that federal securities laws don’t apply to claims of foreign buyers of non-U.S. securities on foreign exchanges. The transactions with the CDOs at issue in the SEC’s complaint were done overseas with a German bank and a Dutch bank, according to Tourre.
Tourre has sparred with the SEC over documents held by German authorities that he said he needs to defend himself in the agency’s suit.
U.S. Magistrate Judge Michael Dolinger in Manhattan, who is presiding over pretrial matters in the case, said in an order posted today that he won’t order the SEC to ask German officials to obtain documents from Dusseldorf, Germany-based IKB Deutsche Industriebank AG.
Dolinger said an agreement between the SEC and its German counterpart is intended to permit the agencies to help each other enforce securities laws in the two countries and can’t be used by Tourre to help gather evidence in his case.
“It most certainly was not intended to allow a litigant accused of securities fraud to obtain discovery in Germany that the German authorities do not otherwise allow,” Dolinger said.
Dolinger did grant Tourre’s unopposed motion for a court-issued request to the German agency to provide the documents.
“Suffice it to say, we leave to the German authorities the decision whether to honor all, some or none of these requests,” Dolinger said in his ruling.
Pamela Rogers Chepiga, a lawyer for Tourre, didn’t immediately return a voice-mail message seeking comment on Dolinger’s ruling.
Dolinger last month denied a request by Tourre to delay the SEC from taking pretrial testimony in the case. He claimed he couldn’t “effectively participate” in depositions until getting documents from IKB, which his lawyers described in court papers as a “purported ‘victim’ of the alleged fraud.”
The case is SEC v. Goldman Sachs, 10-cv-03229, U.S. District Court, Southern District of New York (Manhattan).