The Farcical Prosecution of “Fab” Tourre
Admittedly, it takes all the charity in one’s heart to feel any sympathy for Fabrice Tourre, the Goldman Sachs bond trader who gleefully sold securities he knew to be toxic to institutional clients he played as suckers. “Fabulous Fab,” his email nom de plume when corresponding with his girlfriend, underscores Tourre’s unabashed arrogance and his prescience about the inevitable collapse of the securities he was peddling, and leaves no doubt that he knew exactly what he was doing. Nevertheless, the SEC’s decision to charge the 31-year-old trader while letting Goldman off the hook is akin to prosecuting someone for securing a get-a-way car for an armed bank robber while letting the bank robber walk free.
As Tourre makes clear in his court filing, bigwigs in Goldman’s legal, compliance, and sales and trading areas knew full well what he was up to. There hasn’t even been a scintilla of evidence introduced suggesting that Tourre was a rogue employee — if he was, you can rest assured Goldman wouldn’t keep him on a paid leave of absence and continue paying his legal bills.
In allowing Goldman to settle for a measly $550 million without admitting any wrongdoing, the SEC wanted a sacrificial lamb to tar and feather and garner some prosecution batting practice. Goldman’s lawyers were no doubt steadfast against offering up CEO Lloyd Blankein or any other person in a position of meaningful authority, so instead young Tourre got the nod.
Though it’s probably of little comfort to “Fab,” he is part of a fast growing ignominious group of hapless mid and junior level employees who have taken the fall for their powerful Wall Street bosses. Forbes a few years back chronicled how Bear Stearns sold out some mid-level employees to save its hide in the market timing scandal, and former New York Attorney General Eliot Spitzer only chose to prosecute a mid-level broker named Ted Sihpol for Bank of America’s market timing scandal.
Such is the rule of justice on Wall Street. The most senior executives — the ones ultimately responsible for sanctioning the industry’s widespread fraud and wrongdoing — are never held legally accountable. Goldman’s $550 million fine will sting a tad for a quarter, but it won’t cause Blankfein to get religion and ensure no further wrongdoing occurs under his watch.
In prosecuting “Fab”, perhaps the SEC is sending a signal that it will get tough on any employee involved in unethical or questionable activities. But if the SEC truly wants to curb wrongdoing on Wall Street, they should start at the top.
Jacob ("Jake") H. Zamansky is one of the country’s foremost authorities on securities arbitration law, the legal recourse for investors claiming broker wrongdoing, or for brokers claiming wrongful termination or other misconduct by their employer. Zamansky & Associates, the New York-based law firm he founded, represents both individuals and institutions in complex securities, hedge fund, and employment arbitrations.
Stuart Gittleman Commented on July 26, 2010 at 9:10 am
Maybe Fab will lift the rock to show what’s underneath. How does SEC v GS compare with the recent FINRA $7.5 million fine against Deutsche Bank for “negligently” referencing incorrect loan default histories, and not correcting or disclosing the errors after learning of them, in $4 billion or more in subprime securitizations?