[ by Melanie Gretchen ]

SEC attorneys, who thirst for a conviction in any of its civil complaint trials, won a key ruling in its case against Goldman Sachs sales trader Fabrice Tourre,   Having Goldman Sachs out of the picture - after it agreed to pay $550 million to settle SEC charges quite some time ago, the firm and its executives have continued on with their lives essentially unobstructed. 

No so for this solitary employee who lives with SEC charges every day and who must defend himself alone, essentially hanging on by his fingertips.  Of course, his firm, Goldman, stands behind Mr. Tourre, picking up his defense bills.  Yet, it's been 3 years since the SEC filed charges against the defendant and his employer. 

And since the Goldman Sachs case remains a message case for the SEC - its lawyers have been roundly criticized for failing to convict Wall Street executives on charges related to the great credit crisis of 2008.  Given the possibility that Mr. Tourre may be the last viable opportunity for Wall Street blood, every step and every element of this case is amplified.

Court Ruling on Admissibility of Phone Tapes.   Having said all that, the news today relates to the fact that the federal judge agreed to allow a taped phone conversation to be heard in his court - and to be admitted into evidence.  Nevertheless, let's refocus on the nature of the case:  the SEC says that Mr. Tourre misrepresented CDOs sold during the credit crisis, to institutional customers.  

The charges were first brought against Mr. Tourre in April 2010, for allegedly defrauding investors in a CDO called Abacus 2007-AC1,.  Apparently, neither Goldman Sachs nor Mr. Tourre disclosed that a hedge fund run by billionaire John Paulson helped select the underlying mortgagers for the CDO, and then planned on betting against the CDOsu to plunge in value as the underlying mortgages went unpaid. 

The call in question - placed in January 2007 but surfaced in December 2012, was between a Goldman saleswoman and an executive at ACA Financial Guaranty Corp, which helped pick securities backing the collateralized debt obligation about which Goldman and Tourre allegedly misled investors.  On the tape, Goldman saleswoman Gail Kreitman is heard telling ACA employee Lucas Westreich that Goldman was "placing a 100% /of the equity" with Paulson & Co Inc. 

Conclusion Drawn From the Phone Conversation.    The SEC argued the tape will supports its claim that Tourre tricked ACA into believing Paulson had a long investment in the CDO when the hedge fund instead planned to bet against it.  In their bid to exclude the record, defense lawyers contended that the the SEC improperly failed to disclose telephone logs that would have revealed ACA had recordings like this and others that could be evidence.

"That's the penalty they should pay for conducting an improper investigation and not getting it." -- Pamela Chepiga, a partner at Allen & Overy representing Tourre.

Judge's Ruling.   On Friday, U.S. District Judge Katherine Forrest at a hearing in Manhattan federal court ruled the SEC could use it.  Nevertheless, she said she regretted the way the recording was handled: "This is a mistake.  But we're going to move beyond it."

Going forward, Tourre's lawyers could conduct further discovery and depositions related to the recording.   To date, Mr. Tourre is still employed at Goldman Sachs.

The case: SEC v Goldman Sachs & Co et al, U.S. District Court, Southern District of New York, No. 10-03229.

For further details, go to [Reuters, 4/26/13].