[ by Howard Haykin ]

In April 2010, the SEC linked Goldman Sachs and Fabrice Tourre on civil charges that they misled clients on the sale of a controversial collateralized debt obligation, or CDO, called Abacus 2007-AC1.  They were accused of failing to disclose to institutional customers that the underlying bond portfolio to the investment product would be selected by a hedge fund manager - John Paulson - who also intended to take a short position on the CDO, betting that the bonds portfolio would fall in value. 

Nearly three years later, Mr. Tourre is the only remaining defendant in the SEC's civil suit over the Abacus deal.  The case is likely to go to trial in July.  Mr. Paulson was never a party in the case.  In July 2010, Goldman Sachs agreed to pay a $550 million fine to settle the SEC's charges against the firm. Goldman admitted it made mistakes and vowed to change certain business practices. Mr. Tourre decided to fight, and continues to fight, because:

a)  he believes he's innocent;
b)  he could not afford the high cost of settling with the SEC;
c)  a settlement would end his Wall Street career - he no longer could work for Goldman and no other firm would hire him;
d)  all the above.

Goldman put Mr. Tourre on paid leave in 2010 when it settled its charges with the SEC.  Since late 2011, Mr. Tourre has been a graduate student in economics at the University of Chicago, and Goldman changed his status to unpaid leave.  He left the firm at the end of 2012, a company spokesman said.  The firm, however, is still paying the trader's legal bill.  Mr. Tourre is represented by Pamela Chepiga, a partner at Allen & Overy LLP.  It's unclear how much his defense has cost so far.

Fabrice "Fabulous Fab" Tourre.   Like many other sales traders, Mr. Tourre can act 'over the top' and make indiscreet statements.  His association with Goldman Sachs brought a a certain distinction or notoriety to Mr. Tourre.  His often over-the-top emails that were released when the SEC first announced the charges, made headlines in 2010 and lifted Mr. Tourre's larger-than-life personality a couple of notches higher.

• In one note to a friend, Tourre claimed he managed to sell the product in question to some "widows and orphans" that he ran into at an airport. 
• In an email to another friend, Tourre wrote: "The whole building is about to collapse anytime now … Only potential survivor, the fabulous Fab[rice Tourre] … standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!"

Closing.   Wall Street offers tremendous opportunities to make lots and lots of money, for those who generate revenue for the firm.  Job guarantees do not exist, especially in this day and age.  And there's no shortage of 'unrequited love'.  Nevertheless, it's not pleasant to see an individual standing alone on a boat in the middle of the ocean, knowing that three years earlier that individual was thrown onto the boat along with his or her employer. 

An individual's life as it existed before the SEC came knocking often dies, while the company and the individual's former associates move on.  Such outcomes not only are unfair, but the can be cruel.  And that is when it becomes essential for that lone individual to possess the fortitude to reinvent him- or herself.  Only then, can one successfully move on, though no without some level of resentment for having been abandoned. 

Notwithstanding Fabrice Tourre's guilt or innocence in this case, or his arrogance and braggadocio, we're pleased to see him pursue a PhD in Economics and establish a new path in life.  We hope he receives a fair hearing in court and an appropriate outcome.  Most of all, we wish him well in he future endeavors. Fortunately, he is still young and has much time ahead to enjoy his new life.

For further details, go to:   [ Dealbook , 1/31/13 ]    [ WSJournal, 1/31/13 ] .