In Surprise, Tourre Defense Calls No Witnesses

In Surprise, Tourre Defense Calls No Witnesses

It was over virtually as soon as it began.

The defense team for Fabrice Tourre, the former Goldman Sachs trader accused of defrauding investors in a mortgage deal six years ago, began its case about 11:47 a.m. One minute later, it rested without calling any witnesses — not even John Paulson, the billionaire whose hedge fund played a big role in the security at the heart of the trial.

That decision, following more than two weeks of witnesses called by the Securities and Exchange Commission, highlights the confidence of Mr. Tourre’s lawyers in their fight against a civil lawsuit by the government over the mortgage deal. The move means that closing arguments from both sides will take place on Tuesday, and the jury will begin deliberations on Wednesday.

“Fabrice has testified in the S.E.C.’s case, and ending things short allows the defense to underscore to the jury where the burden of proof lies – that is squarely on the S.E.C.,” said Susan Brune, who successfully defended Matthew M. Tannin, one of two former Bear Stearns executives acquitted in 2009 on charges they misled investors in their mortgage-backed securities hedge funds.

Defense lawyers deliberated changing up their strategy in recent days, with the final decision having been made as late as Monday morning, people briefed on the matter said. The team was encouraged by the last piece of evidence that the S.E.C. submitted in its case: the videotaped deposition of Michael Nartey, a former salesman in Goldman’s London office who worked on the mortgage investment at the heart of Mr. Tourre’s case.

During the deposition, parts of which were played for the jury, Mr. Nartey testified that his colleague never told him that the hedge fund Paulson & Company — which was betting against the mortgage deal — had a hand in selecting the securities that ended up in the security. That left Mr. Nartey with no opportunity to inform his client, IKB, a German bank that decided to invest in the trade.

But Mr. Nartey also testified that had he been told of Paulson & Company’s investment, he likely would not have disclosed it anyway. Client confidentiality rules would likely have prevented him from revealing the hedge fund’s name to IKB in the first instance, he said. He added that such mortgage investments need both investors betting that the deal will succeed and those who are willing to wager that it will fail.

Ultimately, Mr. Nartey said, he viewed ACA Management, the portfolio manager, as the ultimate arbiter of which mortgages were included in the investment. “I’m not sure I would have seen Paulson as selecting the portfolio,” he testified in the videotaped deposition.

Susanne Craig contributed reporting.



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