In Complex Trading Case, Jurors Focused on Greed

In Complex Trading Case, Jurors Focused on Greed

When nine New York residents shuffled into a cramped jury room in the federal courthouse in Lower Manhattan on Wednesday, they were divided over Fabrice Tourre’s culpability in a toxic mortgage deal sold to investors.

Then, over more than 13 hours, the five women and four men pored over reams of disclosure documents that Mr. Tourre and his employer Goldman Sachs had provided for investors in 2007, grappling with the nuances of the Securities and Exchange Commission’s case. One juror, 32-year-old Tina Oommen, scribbled the various charges facing the former trader on a white board. Others scoured the voluminous transcript from the three-week trial.

Tension mounted among the nine — which included educators, a stockbroker, an Episcopal priest and a digital advertising employee who reads Esquire magazine — as the deliberations dragged on.

“It got really intense; it reminded me of religion,” said the Rev. Beth F. Glover, the 47-year-old priest who initially struck a skeptical tone about aspects of the government’s case. She questioned whether Mr. Tourre’s supposed violation was “material,” a finding that was needed to rule against the former trader.

At 3:12 p.m. on Thursday, the jury reached a verdict. Mr. Tourre, they decided, was liable for six of the seven counts.

Interviews with five of the nine jurors, an eclectic group spread across Westchester County, Manhattan and the Bronx, pulled back a curtain on the private deliberations in the S.E.C.’s most prominent trial stemming from the financial crisis. The jurors, speaking from their homes and offices a day after the trial, described the genesis of their decision.

They expressed sympathy for Mr. Tourre, alternately calling him a “scapegoat” and a “willing participant” in Goldman’s vast mortgage machine.

But ultimately, the jurors said, their decision came down to what they saw as the letter of the law and, for some, a broader concern that Mr. Tourre’s actions underscored a fundamental problem with society: Wall Street greed.

“He is what Wall Street is all about and it scared me,” Evelyn Linares, a school principal from the Bronx, said on Friday in an interview from her porch. “You go in thinking you can make a difference and you get sucked in.”

The S.E.C.’s case hinged on its grim portrayal of Wall Street.

In his opening argument to the jury, Matthew T. Martens, the leading lawyer for the agency, depicted the case against Mr. Tourre as an assault on “Wall Street greed,” arguing that the former trader had created a deal “to maximize the potential it would fail.”

Mr. Tourre, Mr. Martens later declared in his closing remarks, was living in a “Goldman Sachs land of make-believe” where deceiving investors is not fraudulent.

That argument resonated with the jurors.

“Mr. Martens told us at the beginning that we would see this was all about Wall Street greed, and we did get to see that,” Ms. Linares said.

And jurors said that they trusted Mr. Martens, with one describing the clean-cut lawyer as “Marine-like.”

For Mr. Martens, the case was his final act at the S.E.C. He has already notified the agency’s enforcement chiefs that he will soon depart for a white-shoe law firm, a person briefed on the matter said. Mr. Martens, the person said, is currently choosing between Latham & Watkins and WilmerHale.

For the S.E.C., whose credibility as a regulator came into question after failing to thwart the crisis, the jury delivered a long-sought courtroom victory. The triumph over Mr. Tourre follows one disappointment after another for the S.E.C., including two similar mortgage-related cases that crumbled last year.

In an e-mail to the trial team after the verdict, an S.E.C. official thanked the lawyers for securing a victory. “We needed this,” the official said.

Still, some critics have questioned why the agency chose to make Mr. Tourre — a midlevel employee who was 28 at the time of the mortgage deal — the face of the crisis. Not one executive at Lehman Brothers, which filed Wall Street’s biggest bankruptcy ever at the height of the crisis, was charged with wrongdoing.

Mr. Tourre’s lawyers seized on that sentiment, painting the trader as a scapegoat who abandoned his Wall Street career to pursue a doctorate in economics from the University of Chicago. The lawyers also noted that senior Goldman executives had approved the deal.

The jurors were sympathetic to that argument. After reflecting on Mr. Tourre’s case, Beverly Rhett, a former special education teacher known as juror No. 2, commented: “I could characterize him as somewhat of a scapegoat.”

Ms. Glover, the priest, echoed those remarks. “It is a shame lower-level employees get pulled in,” she said. “There’s a part of me that felt it was very unfair.”

Yet his lower-level status, jurors say, did not erase what he did.

“We were asked to look at his actions,” Ms. Glover said, as she sipped coffee, with a button pinned to her shirt saying “We Care About Your Spiritual Needs.”

“They portrayed him as a cog, but in the end a machine is made up of cogs and he was a willing part of that,” she said.

Ms. Linares, the school principal, said, “We don’t think he deserved to take the blame for everything but he did play along.”

The scheme, according to the S.E.C., involved the marketing of a mortgage deal in 2007. At the heart of the agency’s case was the claim that Mr. Tourre and Goldman sold investors the deal without disclosing a crucial conflict of interest: a hedge fund that helped construct the deal also bet that it would fail.

Mr. Martens also cited an e-mail in which Mr. Tourre stated that the riskiest slice of the mortgage trade — a piece typically bought by someone betting that the deal would succeed — was “precommitted,” when in fact it was not even going to be offered.

Mr. Tourre, his lawyers argued, corrected that misstatement in offering documents that followed, calling that slice N/A or not applicable. But some jurors said they didn’t feel that convincing, because the tranche the hedge fund bought was also listed as N/A when it wasn’t.

His lucrative paycheck — $ 1.7 million in 2007, the year he assembled the mortgage deal in question — also swayed some jurors.

Still, Ms. Glover was not initially convinced. She debated whether it was “material” for investors to know if the hedge fund’s role in the transaction.

“Industry practice was also not to disclose,” she said, reciting a line from the defense’s playbook.

And when the S.E.C. quoted embarrassing love notes Mr. Tourre sent to his girlfriend, some jurors felt sympathy rather than condemnation. Ms. Linares also prayed for Mr. Tourre — and the other witnesses — every day during the trial.

Other jurors were more adamant that Mr. Tourre was liable. When they couldn’t agree on a particular charge, they would shift to another issue.

“At times things got heated. We were trying to play both sides of the fence and there were times when we didn’t agree on things,” Leonel Lopez, the Esquire-reading advertising employee, added.

Mr. Tourre lost, the jurors said, despite performing well on the witness stand over three days.

In fact, some jurors questioned why Mr. Tourre’s lawyers didn’t keep him there longer.

“It was a big shock to us that they didn’t ask more questions,” Ms. Glover said. “He was likable and engaging,” she said, adding it would have been easier for jurors if he was more villainlike.

While the loss also raised questions about the defense team declining to call a single witness, most jurors said that decision did not sway their vote. Mr. Lopez, 27, said the decision “didn’t strike me as odd because they did get a chance to question the prosecution’s witnesses.”

According to legal experts, defense lawyers commonly present no defense when the government has already called their client as a witness.

“It’s both a show of confidence and a tactic to get the jury to focus on the fact that the burden of proof rests with the government,” said Evan T. Barr, a former federal prosecutor who now defends white-collar cases as a partner at Steptoe & Johnson. “I would not be second-guessing the decision.”

A lawyer for Mr. Tourre declined to comment. Goldman Sachs, which settled its part in the case by paying a $ 550 million fine in 2010, also declined to comment. The bank has paid for Mr. Tourre’s defense, and is likely to continue doing so.

While Mr. Tourre was the one on trial, the case weighed on jurors as well. Some traveled from more than an hour away each day, and then were forced to cram in work every evening.

Jurors were provided muffins or doughnuts by the court on some mornings. Nonetheless, Ms. Linares, on a special diet she started just before trial, says she lost 20 pounds — taking her muffin home for her 87-year-old mother.

“It’s been a long three weeks,” Reece Pate, 37, a graphic designer known as juror No. 7, said. “I’m trying to get back into my normal routine.”

For Ms. Rhett, the retired teacher, the trial ended just in time for her to make a cruise. Reached late Thursday night, Ms. Rhett said she returned home after the verdict and began to read media articles.

“I had no idea how big the case was. I had not read anything or heard anything.”

After the verdict on Thursday, Steven Zucker, the jury foreman, suggested a reunion, and Ms. Rhett collected everyone’s e-mails. One person recalled Mr. Zucker, the former stockbroker, saying, “We should all go out for a drink.”

William Alden contributed reporting.



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