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July 17, 2013

The silly trial of Fabrice Tourre

There’s a huge amount of legal firepower on display in lower Manhattan right now, all centered on a University of Chicago grad student named Fabrice Tourre. Arrayed against him, in this civil case, is the might of the SEC, which has tapped the head of its trial unit, Matthew Martens, to take a lead role. Tourre’s own lawyers, who have been representing him for the past three years, include none other than Sean Coffey.

It’s fair to assume that many, many millions of dollars are being spent on this trial. But what’s much less clear is why. Tourre was a junior salesman, buried deep inside the Goldman Sachs CDO machine, and, almost exactly three years ago, Goldman Sachs paid $550 million to settle the charges against it. Why is the SEC, in 2013, still putting so much effort into chasing a single individual from Goldman Sachs? Certainly Tourre doesn’t have the wherewithal to be able to make any significant difference to the amount of money the SEC will end up collecting in this case — which means that this case is personal: the SEC wants to ban Tourre from the securities industry, and to possibly drive him into personal bankruptcy, as well, if they can extract a large enough fine.

The pathos here is unavoidable: this single case, brought against a minor spear-carrier in the great CDO saga, has become the SEC’s best hope, in the words of the NYT, for “a defining victory in its uneven campaign to punish those at the center of the crisis”. Surely the SEC would have been better off quietly settling: even a victory will seem pretty thin gruel, given that the people who really made out like bandits are being celebrated with keynote luncheon appearances at the Pierre Hotel even as the trial drags on downtown.”


Read full Felix Salmon’s Reuters opinion piece here

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