The jury in the civil fraud trial of Fabrice Tourre, the former Goldman Sachs Group Inc. (GS:US) vice president sued by regulators over his role in a failed billion-dollar investment, sent three notes with questions to the presiding judge during its second day of deliberations.
The jury of four men and five women is considering whether to find Tourre liable for misleading participants in a 2007 transaction known as Abacus. The U.S. Securities and Exchange claims Tourre hid the role of hedge fund Paulson & Co. in selecting the subprime mortgage bonds behind the investment, then made a $1 billion bet they’d fail.
In one note, the jury asked U.S. District Judge Katherine Forrest about its instruction covering a claim that Tourre engaged in a fraud in connection with the sale of Abacus notes and with two related credit-default swaps. The jurors asked if the SEC was required to prove a fraud in connection with all three transactions or just one. Just one, Forrest said.
In another note, the jury referred to the SEC’s duty to prove that Tourre obtained money or property as a result of his conduct. Jurors wondered: does money obtained for Goldman Sachs count? No, Forrest said. What about Tourre’s normal salary? jurors asked. The judge sent them out of the courtroom while she considered arguments from both sides. Forrest ruled Tourre must have received a bonus or compensation that he wouldn’t have otherwise had without the transaction.
A third note asked for the exhibit number for an e-mail Tourre sent on Feb. 2, 2009, to Paolo Pellegrini, a former Paulson executive who testified in the trial. All three notes were signed by the jury’s foreman, a 52-year-old former retail broker who works as a dean of art history at Khan Academy, a free online school.
The table in the jury room was covered with papers, empty soda and water bottles and cups of coffee. In the back of the room, to the side of a plate of pastries, a white board has diagrams drawn by the jurors using colored markers.
In red, someone drew a diagram of a tranched collateralized debt obligation, or CDO, modeled after one Tourre’s lawyer, John “Sean” Coffey, introduced at trial. Many of the jurors were dressed more nicely than usual today.
After the judge instructed the jury, Tourre, wearing a gray suit, white shirt and purple tie, huddled with his lawyers, Coffey and Pamela Chepiga, before leaving the courtroom.
The jury is considering seven claims that Tourre violated U.S. securities laws in the construction and marketing of Abacus. Tourre faces money penalties and a possible lifetime ban from the securities industry if he’s found liable.
The deliberations followed a two-week trial that featured testimony from former Paulson hedge fund executive Pellegrini and from Tourre himself. Lawyers for Tourre and the SEC stayed close to Forrest’s courtroom, awaiting a verdict or additional notes.
The case is SEC v. Tourre, 10-cv-03229, U.S. District Court, Southern District of New York (Manhattan).
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