UPDATE 1-SEC shines spotlight on little-known Goldman exec

* Employee named in SEC suit is no household name

* SEC finds no reason to charge John Paulson’s hedge fund

* Some investors may be uneasy about his timely trade
(Adds Tourre’s age in paragraph 6)

By Matthew Goldstein and Svea Herbst-Bayliss

NEW YORK/BOSTON, April 16 (BestGrowthStock) – On Wall Street, where
fortunes are made and lost in a minute, reputations are built
up and destroyed just as quickly.

That’s how a well-paid but little-known bond salesman can
become headline news in one of the biggest securities
enforcement cases against a major Wall Street bank in years.

It’s also how a soft-spoken hedge fund manager, long
considered a genius investor, can suddenly look a bit

The bond trader is Fabrice Tourre, the lone Goldman Sachs
(GS.N: ) executive charged on Friday by the U.S. Securities and
Exchange Commission in a civil case arising from Goldman’s
underwriting and sale of a now-busted $2 billion synthetic
collateralized debt obligation (CDO).

The soft-spoken hedge fund manager is John Paulson whose
big hedge fund made a cool $1 billion by helping Goldman
package the CDO and then betting against it.

The SEC charged both Goldman and 31-year-old Tourre, who
was born in France and graduated from Stanford Graduate School
of Business in 2001, with “making materially misleading
statements and omissions” in marketing the deal to insitutional

No one from Paulson & Co, the fund founded by Paulson, was
charged or implicated. In fact, SEC officials said there was no
basis for filing civil charges against the hedge fund.

It’s a different story for Goldman and Tourre, who could
not be reached at his London office on Friday.

The SEC alleges they failed to disclose to investors buying
the CDO tranches that Paulson & Co had played a major role in
picking the underlying mortgage securities that went into the
CDO. The deal was called Abacus 2007-AC1.

Regulators say Tourre and Goldman also failed to tell
investors that Paulson and Co stood to benefit from the poor
performance of the CDOs because the fund was betting on a
decline in the value of the complex security.


The SEC sprinkled emails from Tourre throughout the 22-page
complaint, and they paint an unflattering picture of the young
executive who recently moved to Goldman’s London offices.

In early 2007, Tourre was caught writing to friends and
associates that the “CDO biz is dead” and that Goldman was in a
race against time to get the Abacaus 2007 deal done.

In one email, Tourre, who attended two of the best Paris
high schools, comes off projecting his own self-importance.

“The whole building is about to collapse anytime now,” he
wrote to a friend. “Only potential survivor, the fabulous Fab
standing in the middle of all these complex, highly leveraged,
exotic trades he created without understanding all of the
implications of those monstrousities!!”

Paulson strongly defended his fund. “As the SEC said at its
press conference, Paulson is not the subject of this complaint,
made no misrepresentations and is not the subject of any
charges,” a Paulson spokesman said in a statement. “Paulson did
not sponsor or initiate Goldman’s Abacus program.”

Still, some in the hedge fund world wonder whether
investors will get nervous and head for the exit.

Paulson’s shrewd bet against the mortgage market has been
well-chronicled in the business press and in a book by Wall
Street Journal reporter Gregory Zuckerman called “The Greatest
Trade Ever.” And it’s a bet that was done by other hedge funds
that wagered on the collapse of the housing market.

Now, some investors may take a second look at that
well-timed trade in light of the SEC action against Goldman.

Indeed, Paulson’s one-time co-manager spoke with financial
regulators in 2008 when they approached the firm on trying to
understand these securities better, a source close to the
investigation said.

Italian-born Paolo Pellegrini, who attended Harvard
Business School with Paulson, has gone on to start his own
hedge fund and now lives in Bermuda.

With the newfound riches from his trade of a lifetime,
Paulson bought a spread in Manhattan’s most exclusive new
building on the southern edge of Central Park at 61st Street,
where Goldman Chief Executive Lloyd Blankfein also lives.

Investment Tools

(Reporting by Matthew Goldstein and Svea Herbst-Bayliss;
Editing by Ted Kerr)

UPDATE 1-SEC shines spotlight on little-known Goldman exec