Goldman Sachs

Fabrice Tourre, Wall Street's 'Fabulous Fab, heads for trial

As fraud case begins against trader who joked about selling toxic bonds to widows and orphans, friends recall his volunteer work

PUBLISHED : Tuesday, 16 July, 2013, 12:00am
UPDATED : Tuesday, 16 July, 2013, 3:32am

Fabrice Tourre is best known as "Fabulous Fab", the former Goldman Sachs trader whose e-mails about the mortgage crisis became a symbol of Wall Street hubris and will now highlight the government's case against him.

As the economy was on the brink of collapse, e-mails show Tourre joked to a girlfriend that he sold toxic real estate bonds to "widows and orphans".

But an inner circle of friends knows Tourre, 34, from very different dispatches - e-mail updates he sent from Africa during a stint as a volunteer. It was there that "Fabulous Fab", a nickname he earned from a friend in New York, became known as "Breezy".

"Rwandan coffee yields have significant room for improvements," he wrote in a March 2011 message to friends. "Plenty of ideas and projects to focus on, with the ultimate goal to improve coffee farmers' income and living conditions!"

The e-mail provides a glimpse into Tourre's life after Goldman, and after the Securities and Exchange Commission (SEC) charged him with fraud in connection with a fund which lost investors around US$1 billion.

After his trip to Africa, Tourre enrolled in an economics doctoral programme at the University of Chicago, where professors described him as a "standout" whom they selected as a teaching assistant for junior students.

Tourre's character will come into focus at his trial, which was due to open yesterday in a federal court in Lower Manhattan.

The human elements of the case, which could be put under the spotlight when he takes the witness stand, might sway a jury otherwise bogged down in the minutiae of high finance. While Tourre's time in Rwanda is unlikely to play a role in the trial, he may nonetheless come across as a dynamic professional.

Working in his favour, he has already calmly faced a Senate committee. He speaks slowly, the hearing showed, careful to enunciate. Still, jurors may view him as another ambitious Wall Streeter, one with a distinctly foreign accent.

In what is considered the most prominent case stemming from the financial crisis, the SEC is expected to paint Tourre as a brash up-and-comer at Goldman, willing to sell investors products that were sure to fail. At Goldman Sachs, in early 2007, Tourre designed the complex "Abacus" investment product, based on subprime, or higher-risk mortgage-backed, securities

He was accused of failing to warn investors that a hedge fund headed by investor John Paulson was involved in the selection of the composition of Abacus. Paulson was betting on the fall of the US housing market. When the affair became public in April 2010, US media lambasted the apparent arrogance of Tourre, who refused to apologise during a hearing in Congress.

In e-mails published after the scandal broke, Tourre, then a vice-president at Goldman Sachs, called the financial products he was creating "monstrosities" and little "Frankenstein", and made fun of the "poor, little subprime borrowers".

"Fabrice Tourre has done nothing wrong. He is confident that when all the evidence is considered, the jury will soundly reject the SEC's charges," his lawyers said.

The trial, however, could cost him dearly as the SEC is demanding reimbursement for losses, as well as a fine. Goldman was charged alongside Tourre, but chose to settle, paying what was at the time a record US$550 million penalty, without admitting or denying guilt. That left Tourre to tackle the SEC alone, though with Goldman's resources financing his fight. Tourre no longer works for Goldman.

Douglas Weaver, a former Goldman executive who had dinner with Tourre recently, said Tourre was upbeat.

Additional reporting by Agence France-Presse