Open

Coming up

Don't miss

Replay


LATEST SHOWS

FOCUS

Mothers and children leaving Honduras at all costs

Read more

INSIDE THE AMERICAS

US journalist Peter Theo Curtis freed in Syria

Read more

WEB NEWS

"Ice Bucket Challenge" angers anti-abortion activists

Read more

ENCORE!

An art wonderland: A burnt-out piano, a bed in a box and a giant magic mushroom

Read more

THE INTERVIEW

Historian Jean Garrigues: 'For the first time, Hollande knows what he is doing'

Read more

MEDIAWATCH

'Macron-economy' pun already worn out

Read more

DEBATE

What Next for Gaza? Lasting Ceasefire Agreed After 50 Days of War

Read more

DEBATE

What Next for Gaza? Lasting Ceasefire Agreed After 50 Days of War (part 2)

Read more

BUSINESS DAILY

New French economy minister signals changes to 35-hour week

Read more

  • Russian troops have entered Ukraine, says Kiev

    Read more

  • Assad cannot be partner in fight against terrorism, says Hollande

    Read more

  • Brad Pitt and Angelina Jolie say ‘I do’ in France

    Read more

  • New Ebola case in Nigeria brings death toll to 1,552

    Read more

  • Video: 'Neither Baghdad nor the US can defeat the Islamic State'

    Read more

  • Platini will not run against Blatter for FIFA presidency

    Read more

  • Air France pilots announce week-long strike in September

    Read more

  • Erdogan's inauguration paves way for constitutional change

    Read more

  • New French economy minister takes swipe at 35-hour work week

    Read more

  • Air France suspends flights to Ebola-stricken Sierra Leone

    Read more

  • Uzi shooting by 9-year-old rekindles gun debate

    Read more

  • Mother of American journalist asks IS leader for his release

    Read more

  • UN probe accuses Syrian regime, Islamists of ‘crimes against humanity’

    Read more

  • Uruguayans sign up to grow marijuana at home

    Read more

  • Missouri governor appoints black public safety director

    Read more

  • French unemployment rises 0.8% in July to record high

    Read more

  • Video: Iraq’s Yazidis flee to spiritual capital of Lalish

    Read more

  • Video: Milan is starting point for Syrian refugees’ European odyssey

    Read more

Business

French banker ‘Fabulous Fab’ goes on trial in New York

Text by FRANCE 24

Latest update : 2013-07-16

Former Goldman Sachs trader Fabrice Tourre, nicknamed ‘Fabulous Fab’, accused of duping investors into buying high-risk mortgage-backed securities that saw them incur $1 billion in losses, went on trial in New York on Monday.

The trial of the French-born former Goldman Sachs trader Fabrice Tourre, accused of misleading investors and helping to bring about the collapse of the US housing market that triggered the 2008 financial crisis, got underway in New York on Monday.

According to the US financial watchdog the Securities and Exchange Commission (SEC), 34-year-old Tourre, best known by his nickname ‘Fabulous Fab’, was behind a complex mortgage securities investment product that ultimately lost investors a total of around $1 billion.

Known as ‘Abacus’ and developed by Tourre as early as 2007 while working at Goldman Sachs in New York, the product saw investors purchase bundles of high-risk, or subprime, mortgage-backed securities.

However, the SEC alleges that Tourre failed to disclose to investors that the hedge fund Paulson & Co Inc, headed by billionaire John Paulson, had been given a role in choosing the underlying portfolio of mortgage securities sold to investors.

At the same time, Mr Paulson was betting against, or “shorting”, the US mortgage securities market via a financial mechanism known as a credit default swap, bringing him direct financial rewards from the failure of the Abacus investments.

‘A product of pure intellectual masturbation’

Key to the SEC’s case are a number of highly publicised private emails sent by Tourre during his time at Goldman Sachs, which the organisation says show he deliberately set out to deceive investors.

In one such email, sent on January 23, 2007, Tourre states in reference to the financial markets that “the entire system is about to crumble any moment”.

He adds: “[T]he only potential survivor the fabulous Fab … standing in the middle of all these complex, highly levered, exotic trades he created without necessarily understanding all the implications of those monstruosities [sic] !!!"

In another, sent on January 29, he refers to Abacus as “a product of pure intellectual masturbation” and “a little like Frankenstein turning against his own inventor”.

These emails, along with Tourre’s ‘Fabulous Fab’ image, have also served to incur the wrath of the general public, with Tourre seen by many as a figurehead for the type of reckless behaviour typical of Wall Street in the years leading up to the financial crisis.

Just a scapegoat?

However, Tourre’s lawyers are likely to portray their client as something of a scapegoat for the banking system and merely a minor cog in a much larger machine.

Tourre was just aged 28 and a mid-level employee at Goldman Sachs when he was handed responsibility for Abacus.

He is also the sole Goldman executive being sued individually by the SEC in relation to Abacus. The watchdog had initially sought to charge Goldman Sachs over the case but in 2010 the investment bank paid a then record $550 million fine to settle out of court. Tourre is believed to have passed up a chance to settle himself, instead choosing to fight the case.

His defence team is also set to argue that the investors who lost money on Abacus, which include the likes of IKB Deutsche Industriebank AG and ABN AMRO Bank NV, were all highly experienced and had the tools and information available them to properly analyse mortgage investments and make their own decisions over their risk.

SEC under pressure

Meanwhile, the SEC is under pressure to show that it is taking strong action against those seen as responsible for the 2008 financial crisis.

While the watchdog has seen some success in extracting settlements from banks following the crisis, it has so far struggled to hold individuals accountable.

Recent setbacks include the SEC’s failed attempt to charge Citigroup manager Brian Stoker, who it alleged misled investors in a $1 billion mortgage product by failing to tell them the bank had bet against it. The charges were rejected by a federal jury in New York in July last year.

Tourre, should he be found guilty, could be fined, forced to reimburse investors and be banned from the trading floor for life.

Raised in a suburb of Paris, Tourre earned a degree in mathematics from the prestigious École Centrale Paris. He moved to the United States in 1999, aged 20, where he obtained a master’s degree in management science and engineering from Stanford before taking up an internship with Goldman Sachs.

Since leaving Goldman Sachs in the wake of the SEC allegations, Tourre reportedly spent time in Rwanda where he worked as a volunteer helping to create business plans for local farmers, before returning to the US to study for a Ph.D. at the University of Chicago.

Date created : 2013-07-15

  • FINANCIAL CRISIS

    'I did not mislead anyone,' Goldman's Tourre tells Senate committee

    Read more

  • FINANCE

    Goldman Sachs agrees to pay record 550 million dollar fine

    Read more

  • JUSTICE

    Ex-Goldman Sachs chief surrenders to face trial

    Read more

COMMENT(S)