Yesterday, I critiqued Andrew Ross Sorkin’s column (Dealbook’s Sorkin Blows The Return of the Fabulous Fab) for a variety of journalistic sins.
Within that screed was the observation that “No, this is not a referendum on Goldman Sachs. I do not believe ANYONE at the SEC believes this simple 10b-5 case is about anything other material misrepresentations in the sale of a security.”
According to a new article in the NYT, S.E.C. Hopes for Validation in Goldman Sachs Trader Case, that last sentence is incorrect.
“The rarity of the trial underpins its importance . . . For the S.E.C., an agency still dogged by its failure to thwart the crisis, the trial is a defining moment that follows one courtroom disappointment after another…
“Their reputation for trying cases hangs in the balance,” said Thomas A. Sporkin, who was a senior S.E.C. enforcement official until last year when he departed for the law firm Buckley Sandler. “This is their opportunity to show Wall Street that they can prevail against an individual at trial.”
I told Andrew yesterday that if there were any indications the SEC thought this small, 10b5 fraud int he sales of a security was anything other than a simple unimportant case, one that really mattered, I would apologize in writing.
As the quote above makes clear, the SEC apparently does think this case is significant. Perhaps more about their court room litigation prowess than making it the key financial crisis trial, but still this case matters to them.
I am a man of my word, and I must concede that on this narrow issue, Sorkin was right, and I was wrong (consider this your public apology!).
However, all my other 10b-5 contentions remain valid — this is a simple fraud case:
“At the heart of the agency’s case is the contention that in 2007 Mr. Tourre and Goldman sold investors a mortgage security, known as Abacus, without disclosing a crucial fact: a hedge fund run by the billionaire John A. Paulson helped construct Abacus and then bet against it. The S.E.C. cited Goldman for “misstating and omitting key facts” about Mr. Paulson’s involvement. When the mortgage market soured, a German bank and a handful of other sophisticated investors lost more than $1 billion on the deal.”
That is what the trial will turn on, it is what the jury will determine, and it is what will determine the Fabulous Fab’s future career.
Dealbook’s Sorkin Blows The Return of the Fabulous Fab (July 9th, 2013)
S.E.C. Hopes for Validation in Goldman Sachs Trader Case
BEN PROTESS and SUSANNE CRAIG
NYT, July 8, 2013
Trader’s Day in Court May Lack Some Details
ANDREW ROSS SORKIN
NYT, July 9, 2013