(Click on the multimedia graphics chart beside the article to see the mostly civil fraud cases that have taken place so far. Criminality is not the focus of the investigators, so far.)
S.E.C. Case Stands Out Because It Stands Alone
By Louise Story and Gretchen Morgenson - The New York Times
At the height of the housing boom, the 26th floor of Goldman Sachs’s former headquarters on Broad Street in Lower Manhattan was the nerve center of Goldman’s fast-growing mortgage trading business.
Hundreds of employees worked closely in teams, devising mortgage-based securities — billions of dollars’ worth — that were examined by lawyers, approved by management, then sold to investors like hedge funds, commercial banks and insurance companies.
At one trading desk sat Fabrice Tourre, a midlevel 28-year-old Frenchman who was little known not just outside Goldman but even inside the firm. That changed three years later, in 2010, when he achieved the dubious distinction of becoming the only individual at Goldman and across Wall Street sued by the Securities and Exchange Commission for helping to sell a mortgage-securities investment, in one of the hundreds of mortgage deals created during the bubble years.
How Mr. Tourre alone came to be the face of mortgage-securities fraud has raised questions among former prosecutors and Congressional officials about how aggressive and thorough the government’s investigations have been into Wall Street’s role in the mortgage crisis.
Across the industry, “it’s impossible that only one person was involved with fraudulent activities in connection to the sales of these mortgage securities,” said G. Oliver Koppell, a New York attorney general in the 1990s and now a New York City councilman.
In the fall of 2009, when Mr. Tourre learned that he had become a target of investigators for helping to sell a mortgage security called Abacus, he protested that he had not acted alone.
That fall, his lawyers drafted private responses to the S.E.C., maintaining that Mr. Tourre was part of a “collaborative effort” at Goldman, according to documents obtained by The New York Times. The lawyer added that the commission’s view of his role “would have Mr. Tourre engaged in a grand deception of practically everyone” involved in the mortgage deal.
Indeed, numerous other colleagues also worked on that mortgage security. And that deal was just one of nearly two dozen similar deals totaling $10.9 billion that Goldman devised from 2004 to 2007 — which in turn were similar to more than $100 billion of such securities deals created by other Wall Street firms during that period.
While Goldman paid $550 million last year to settle accusations that it had misled investors who bought the Abacus mortgage security, no other individuals at the bank have been named. Now, however, as criticism has grown about the lack of cases brought by regulators, the scope of the inquiries appears to be widening. The United States attorney general, Eric H. Holder Jr., has said publicly that his lawyers were reviewing possible charges against other Goldman officials in the wake of a Senate investigation that produced reams of documents detailing other questionable decisions that were made in the firm’s mortgage unit.
The Senate inquiry was one of several in the past three years. These investigations by Congressional leaders and bankruptcy trustees — into the likes of Washington Mutual, Lehman Brothers and the ratings agencies — were undertaken largely to understand what had gone wrong in the crisis, rather than for law enforcement. Yet they uncovered evidence that could be a road map for federal officials as they decide whether to bring civil and criminal cases.
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