By Pam Martens: August 2, 2013
Fabrice Tourre Testifies Before the Senate Permanent Subcommittee on Investigations, April 27, 2010
Jon Stewart calls them “those f*!*!ing guys. Matt Taibbi at Rolling Stone calls them “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Today, they’re the Wall Street megabank that dodged securities fraud charges by greasing the hand of government with $550 million while their 34-year old salesman stood trial for the crimes.
Yesterday, nine jurors found that a Goldman Sachs vice president, Fabrice Tourre, (infamously known as Fabulous Fab from an email in the case) was liable on six counts of violating federal securities law by intentionally misleading investors. Just what his penalty will be and whether he will be barred from ever working again on Wall Street will be determined at a later date.
The Securities and Exchange Commission, which has no criminal powers, brought the case as a civil suit. Only the U.S. Justice Department can bring criminal cases and it has yet to bring one against any top executive at a major Wall Street firm.
On January 22 of this year, Martin Smith, an award winning producer for PBS’ Frontline, aired a program examining the Justice Department’s lack of prosecution. Smith said on air, “We spoke to a couple of sources from within the Criminal Division, and they reported that when it came to Wall Street, there were no investigations going on. There were no subpoenas, no document reviews, no wiretaps.” Given the recent revelations of mass surveillance of the public at large by the NSA, it is disturbingly revealing that the highest law enforcement office in the country is alleged to have used none of its key surveillance techniques to root out fraud in Wall Street’s biggest firms.
Lanny Breuer, head of the Criminal Division of the Justice Department at the time, announced he would be leaving the Justice Department the day after the Frontline report aired.
According to the SEC complaint against Tourre, he knowingly assisted in creating and selling to customers an investment product designed to fail that had been handpicked for that purpose by a hedge fund manager to facilitate his profiting from a short position. The deal was called Abacus 2007-AC1. (John Paulson, the hedge fund manager, made approximately $1 billion while those on the other side of the trade lost about $1 billion.) According to the U.S. Senate, Goldman Sachs was itself shorting (betting on subprime derivative products to fail) while actively promoting these products to clients.
Goldman skated free with its payment of a $550 million fine. John Paulson was never charged by the SEC, ostensibly because he didn’t sell the product to clients.
One of Tourre’s attorneys was Pamela Chepiga of the London derivatives powerhouse, Allen & Overy. That’s the law firm that signed off on the Structured Investment Vehicles (SIVs) that blew up Citigroup and made it a ward of the taxpayer.
Allen & Overy is a law firm specializing in derivatives and debt markets for big Wall Street firms like Citigroup and Goldman Sachs. It’s a point of interest that a white collar defense attorney like Chepiga works there. Chepiga worked in the 70s and 80s in the U.S. Attorney’s Office of the Southern District of New York. From 1982 to 1984, she was the Chief of the Securities and Commodities Frauds Unit in that office where she coordinated criminal prosecutions with the SEC.
