Fabrice Tourre, a former Goldman Sachs trader accused of intentionally selling bad investments, is facing his civil trial this week.
The Securities and Exchange Commission (SEC) has accused Tourre of devising Abacus 2007-AC1, a mortgage-backed securities bundle, in conjunction with hedge fund manager John Paulson, who made a fortune off of shorting the housing market. All in all, investors lost around $1 billion on the Abacus deal.
The SEC alleges that Tourre deceived his investors by hiding Paulson's involvement and allowing the hedge funder to benefit from the deal.
The SEC announced fraud charges against Goldman Sachs and Tourre in 2010, but later settled with Goldman for $550 million. Tourre, the only individual named in the SEC’s suit, declined to settle.
Judge Katherine Forrest, who is presiding over the case, has allowed Tourre's personal emails into evidence. The emails, many of which became public in 2010, are the basis of the SEC's case and indicate that he was aware of how worthless the mortgage-backed securities he was selling were.
The Wall Street Journal reports that the SEC’s lawyer has already highlighted several emails he said demonstrate Tourre's state of mind at the time of the deal, including one where he refers to a nickname his lawyers say was given to him by a co-worker: "fabulous Fab."
In the January 2007 email, Tourre allegedly says to another co-worker in French: "the whole building is about to collapse anytime now…the only potential survivor, the fabulous Fab."
The jury trial, which is expected to last three weeks as reported by the WSJ, will feature testimony from a number of current and former Goldman employees, including Tourre himself.