New York (HedgeCo.Net) – Former hedge fund manager Fabrice Tourre made a statement yesterday, saying he would not seek appeal at a higher court. “After careful consideration, I have decided not to pursue a lengthy appeal process which, if successful, would lead to a retrial,” Tourre said in the statement. “While my lawyers have advised me there are strong grounds to appeal, I prefer to move forward with my education and close this difficult chapter of my life.”
“Tourre, who made millions during his Goldman tenure, has already paid the S.E.C. $825,000 in penalties and other costs. And an appeal could have complicated, or at least distracted from, his pursuit of a doctorate in economics from the University of Chicago.” The NYT reports.
Tourre was first targeted for making material misstatements and omissions in regards to a CDO that contributed to the financial crisis by magnifying losses associated with the downturn in the United States housing market.
Law 360 reports: “SEC lawyer Matthew T. Martens told jurors that Tourre committed securities fraud by allegedly failing to tell investors that a Goldman CDO from 2007, called Abacus 2007-AC1, was partially created by a hedge fund manager who bet against it.”
According to the Commission’s complaint, Tourre prepared the marketing materials for the CDO and communicated directly with investors. Tourre is alleged to have known of Paulson’s undisclosed short interest and its role in the collateral selection process. He is also alleged to have misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-AC1 (a long position) and, accordingly, that Paulson’s interests in the collateral section process were aligned with ACA’s when in reality Paulson’s interests were sharply conflicting. The deal closed on April 26, 2007.
Paulson paid GS&Co approximately $15 million for structuring and marketing ABACUS 2007-AC1. By October 24, 2007, 83% of the RMBS in the ABACUS 2007-AC1 portfolio had been downgraded and 17% was on negative watch. By January 29, 2008, 99% of the portfolio had allegedly been downgraded. Investors in the liabilities of ABACUS 2007-AC1 are alleged to have lost over $1 billion. Paulson’s opposite CDS positions yielded a profit of approximately $1 billion.
Alex Akesson
Editor For HedgeCo.net
alex@hedgeco.net
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