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Goldman Sachs employee found guilty of mortgage fraud

mortgage fraud

by Joseph Earnest  August 2, 2013

 

Newscast Media NEW YORKA Goldman Sachs banker has been found liable for fraud in a failed investment scheme that faltered over failed subprime mortgage loans. The verdict could open the door to further claims by the bank's customers.

A New York court on Thursday found former Goldman Sacs Inc. Vice President Fabrice Tourre liable on six of seven claims of fraud and other wrongdoing, in a major victory for financial regulators seeking to hold reckless bankers legally responsible for the 2007-2009 US mortgage crisis.

The Securities and Exchange Commission (SEC) had accused 34-year-old Tourre of misleading investors into buying a flawed financial product called Abacas 2007-AC1, which was based on subprime mortgage loans. According to the SEC, Tourre failed to disclose to investors the full involvement of hedge fund billionaire John Paulson in the deal.

Paulson chose the subprime mortgages that underpinned the deal and then betted against them. He won $1 billion (756 million euros) while other investors, such as ACA and IKB Deutsche Industriebank AG, lost by approximately the same amount. Goldman Sachs also profited from millions in fees.

Some of Tourre's emails became a focus of the testimony. In an email to his girlfriend in France at the time, he said that "the whole building is about to collapse anytime now."

Goldman settled with the SEC in 2010 by paying a $550 million fine, without admitting or denying wrongdoing.

US District Judge Katherine Forrest is expected to decide on that later.

"We are gratified by the jury's verdict," said Andrew Ceresney, co-director of the SEC's enforcement division. "We will continue to vigorously seek to hold accountable, and bring to trial when necessary, those who commit fraud on Wall Street."

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Source: Deutsche Welle

  

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