A former Goldman Sachs trader at the center of a toxic mortgage deal lost a closely watched legal battle on Thursday, giving Wall Street’s top regulator its first significant courtroom victory in a case stemming from the financial crisis. ... For the Securities and Exchange Commission, a regulator dogged by its failure to thwart the crisis, the case offered a shot at redemption following one courtroom disappointment after another, including two similar mortgage-related cases that crumbled last year. ... Five years after Wall Street risk-taking nearly toppled the economy, the S.E.C. has taken only a handful of employees to court in connection with the crisis; most cases have been settled. The agency has not charged one top executive at a big bank. “He was the one that didn’t get away,” one of the nine jurors, Beverly Rhetts, said after the verdict. “The decision-making was a slow and arduous process,” said Ms. Rhetts, a retired teacher who was juror No. 2. “We went over each item with a fine-tooth comb. We looked into the semantics and tried to understand them as best as we could.” ... Some critics have questioned why the agency chose to make Mr. Tourre — a midlevel employee who was stationed in the bowels of Goldman’s mortgage machine — the face of the crisis. Rather than aim at a high-flying executive, the agency pursued someone barely known on Wall Street. Those concerns echo another S.E.C. crisis-era case, in which a jury cleared a midlevel Citigroup employee, questioning why the agency had declined to charge more senior executives. Even Ms. Rhett, the juror, after reflecting on Mr. Tourre’s case, said, “I could characterize him as somewhat of a scapegoat.” “There are bigger fish out there swimming fat and free, and they made a lot more money from the mess than Tourre ever dreamed of making,” said Erik Gordon, a professor of law and of business at the University of Michigan. For its part, the S.E.C. notes that it has won about 80 percent of its trials under Mr. Martens and has sued 66 chief executives and other senior officers in cases related to the financial crisis. S.E.C. officials also note that the agency files cases only where they can be proved, even if that means not pursuing top executives insulated from the bad acts of their employees. ... The S.E.C.’s victory reopens some wounds for Goldman, which is paying for Mr. Tourre’s defense. Inside the bank, employees had been quietly cheering for Mr. Tourre, whom one executive called “the poor kid.” Viewing the S.E.C.’s case as thin, the executives saw Mr. Tourre as a proxy for the fight they wanted to wage with regulators. Goldman settled with the S.E.C. in 2010, paying what was at the time a record $550 million fine. The bank conceded that it had made a “mistake.”
Posted on: Fri, 02 Aug 2013 02:23:41 +0000
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