Lawyers for the former Goldman Sachs trader accused of duping clients into buying bad mortgage bonds argued Monday that his incriminating emails were "old-fashioned love letters".
In the first day in the civil trial of Fabrice Tourre, 34, his lawyers moved to dismiss the significance of emails sent to his girlfriend that US regulators claim show the former trader knew he was misleading investors.
In one 2007 email to his girlfriend as the credit crisis loomed Tourre wrote: "The whole building is about to collapse any time now," but that "Fabulous Fab" would survive.
Tourre is fighting a 2010 lawsuit brought by the Securities and Exchange Commission (SEC) against him and Goldman Sachs. The bank settled the charges against it for $550m in 2010, leaving the trader to fight on alone.
"This is a case about Wall Street greed," SEC lawyer Matthew Martins said in opening arguments at the federal civil trial. "It's a case about lies, trickery and deception … In the end it was Wall Street greed that drove Mr Tourre to lie and deceive."
Defense attorney Pamela Chepiga countered that her client "never misled anyone." She claimed the email was really "an old-fashioned love letter" full of self-doubt and angst over upheaval in the financial world. "He's saying, 'There's nothing fabulous about me,'" Chepiga said.
The case "is not about whether you approve or disapprove of Wall Street," she added. "You all took an oath to decide this case on the facts before you … Mr Tourre has chosen to fight to clear his name."
The SEC contends Tourre misled investors in a Goldman Sachs fund called Abacus that invested in complex mortgage-backed assets known as collateralized debt obligations (CDOs). The regulator contends that Tourre failed to disclose that Paulson & Co, the hedge fund run by billionaire John Paulson, was involved in picking mortgage securities tied to the investment and was also betting against it. Investors lost more than $1bn after almost all the securities tied to the transaction were downgraded, the SEC says.
Paulson, who has not been charged with wrongdoing, earned about the same amount thanks to his bet against it, the SEC says.
Tourre denies the allegation and is "confident that when all the evidence is considered, the jury will soundly reject the SEC's charges," his lawyers said in a statement.
The trial, in front of US district judge Katherine Forrest in Manhattan, is expected to last three weeks. The jury was picked Monday and Forrest warned both sides not to bombard jurors with technical language.
She said the lawyers should "have a heart" and be mindful that many jurors would not be familiar with the financial jargon expected to be used at trial.
Among the words or phrases she singled out were "asset-backed," "short," "security," "flip book" and "swap." She also cited the term "trading desk," saying "mere mortals don't know what a trading desk is".
"Do not assume people know what investment bankers do," Forrest said.
guardian.co.uk © Guardian News and Media Limited 2010