Fabrice Tourre was seen as likable, unbelievable and “a bit shady,” said one of the jurors who found the former Goldman Sachs vice president liable for fraud in a failed $1 billion investment.
Beverly Rhett, a retired special-education teacher who lives in the Bronx, N.Y., said the panel agreed with the government that he should have disclosed the fact that Paulson & Co., the hedge fund owned by billionaire John Paulson, helped structure the “Abacus” deal intending for the assets behind it to fail.
Rhett on Thursday spoke on condition of anonymity. She agreed Friday to be identified by name.
Tourre, 34, was found liable Thursday in Manhattan federal court on six of seven claims filed against him by the Securities and Exchange Commission (SEC). He faces penalties that U.S. District Judge Katherine Forrest said will be determined later, with filings due in court later this month, and may be barred from the securities industry.
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The key to the verdict, Rhett said, was the government’s evidence, including documents and emails, that showed Tourre’s alleged duplicity.
The nine jurors delivered their verdict on the second day of deliberations, giving a victory to the SEC in one of the most prominent trials to grow out of the 2007-2008 financial crisis.
Rhett said she and the others had a hard time at first following specialized Wall Street language that the lawyers and witnesses were using.
At times, some of the jurors looked bored, distracted and drowsy.
“I think it was too much information — information overload for someone that’s not in that field,” she said.
That changed over the course of the two-week trial.
“By the end, we had people who sounded like experts” on the transaction, she said of her fellow jurors.
While the jurors liked Tourre, Rhett said, she didn’t believe his story.
In particular, she said she thought he misled Laura Schwartz, an executive with ACA Management, a key SEC witness, about the Abacus deal.
“Someone in his post should have known” that Schwartz wasn’t told about the true purpose of the deal, she said.
The SEC claimed Tourre tricked ACA into serving as a third-party agent to select the assets behind the transaction by leading her to believe Paulson wanted it to succeed, rather than shorting it.
ACA’s former chief executive, Alan Roseman, testified that his belief that Paulson was taking a long position in Abacus was “critical” to his company’s participation.
Rhett said Paolo Pellegrini, a former top Paulson executive, came across to jurors as “defensive, somewhat arrogant.”
Pellegrini spent much of his time on the stand sparring with the SEC’s lead lawyer, Matthew Martens, at one point accusing the agency of tricking and intimidating him in its investigation into the Abacus deal.
“That’s kind of unanimous, that he was a character,” she said of the jurors’ view of Pellegrini.
Jurors based much of their decision-making on documents and emails the SEC argued were evidence of Tourre’s scheme.
Rhett said the panel focused on Tourre’s responsibility but she thinks others at New York-based Goldman Sachs were involved in wrongdoing in the Abacus deal.
“Twenty million dollars is certainly an incentive to scheme,” Rhett said, referring to Goldman Sachs’s anticipated fee from Abacus. “It seemed like it would have had to involve more people than him.”
The firm settled SEC allegations for $550 million in July 2010, a record at the time. In the settlement, Goldman Sachs acknowledged that marketing materials for Abacus contained “incomplete information.”
“We didn’t talk a lot about the personal emails,” Rhett said, referring to Tourre’s notes to his then-girlfriend, in which he alternated musings about his work creating complex investments with pillow talk.
In one email, Tourre wrote about the “monstruousities” he was creating and quoted a friend’s nickname for him, which would later become indelible: Fabulous Fab.
While jurors thought the emails were “somewhat invasive,” they also showed he was “a bit shady,” Rhett said.