She can’t remember.
The federal government’s star witness against former Goldman Sachs trader Fabrice Tourre admitted on cross-examination today that she can’t remember anyone specifically misleading her on what side hedgie John Paulson was going to bet on with the crucial 2007 mortgage securities.
Laura Schwartz, a former executive at bond insurer ACA Management, which, with Paulson & Co., helped choose the mortgage securities for the Abacus 2007 synthetic CDO, testified on direct that she was mislead by executives close to the deal into thinking Paulson was going to buy equity in the deal.
Instead, Paulson bet against Abacus.
Schwartz said ACA would have never bet long on the deal — and would not have been part of a losing $1 billion investment — had it known Paulson was betting against it.
But Schwartz never said anyone specifically mislead her.
That omission did not escape the notice of Tourre’s legal team.
“Did you get written confirmation from Goldman Sachs that Paulson was the equity?” asked Tourre’s lawyer Sean Coffey during cross-examination today.
“I have no recollection” Schwartz said.
“Do you have any recollection of Fabrice ever refusing to answer a question you put him,” Coffey asked her.
“No,” Schwartz responded.
The Securities and Exchange Commission claims Goldman and Tourre misled ACA and other investors by not disclosing that Paulson bet against the CDO.
Goldman settled its case with the SEC. Tourre has denied the civil charge — and is now trying to convince a nine-person Manhattan federal court jury he did not defraud investors.
To do that, Tourre’s legal team has to cast some doubt on Schwartz’ testimony.
Schwartz’s comments come as anticipation is building for the testimony from Tourre himself who is expected to take the stand this afternoon.
In her testimony today, Schwartz later said that Goldman never disabused her of her impression of Paulson as an equity investor.
She also said that it would “have been a shock if I had learned that they were only short,” referring to Paulson’s fund.
Over four hours of cross examination, Schwartz has stated that she doesn’t recollect a lot of the specifics of the Abacus transaction created nearly seven years ago including Tourre specially identifying Paulson as an equity investor.
So far Tourre’s legal eagles have tried to suggest both Schwartz’s firm was only concerned with making its own fees on the deal and said that Paulson being a so-called short investor wouldn’t matter for a bond insurer and investor like ACA with proprietary access to data on that arcane area of the mortgage market and a wealth of resources at its disposal.
So far, Tourre wearing a dark suit and tie has appeared calm, only furrowing his brows occasionally when Schwartz refused to use the term “short” when referring to similar mortgage securities deals she’d completed prior to the 2007 Abacus transaction.