As Fabrice Tourre watches the jury file out of the courtroom this morning to start deliberating his fate, he’ll have this starling fact to ponder: the Securities and Exchange Commission won 87 percent of its trials last year.
The regulator’s 13-2 record is a bit intimidating — so it was more than a little surprising when Tourre’s defense team didn’t call a single witness to counter the SEC’s case that the 34-year-old former Goldman Sachs trader misled investors in putting together and selling a 2007 mortgage bond security known as Abacus.
For the SEC, nailing Tourre is its best shot at nailing a Wall Streeter for misdeeds leading up to the mortgage meltdown.
And it’s not a hard case to prove, lawyers said. With a low burden of proof and broad rules written to favor the house, Tourre’s team took a risk not punching back.
“The thing that the SEC has going for it is that the burden of proof in this case is far less,” said white-collar lawyer Michael Bachner.
Manhattan federal court Judge Katherine Forrest will instruct the nine-member jury today to determine Tourre’s fate based on a so-called preponderance of the evidence. In a criminal case, the burden is beyond a reasonable doubt.
The SEC has accused Tourre of misleading investors over the role of hedge-fund honcho John Paulson in engineering a $1 billion mortgage deal that blew up.
Anthony Sabino, a criminal lawyer and law professor at St. Johns University, said the government is wielding rule 10b-5, which broadly prohibits any act of omission in the sale of securities.
“Any lie of omission … and he can be found guilty,” said Sabino. “It’s the ultimate weapon in the arsenal of the SEC.”
Tied heavily to a series of emails, Tourre’s case is similar to one that the government lost against former Bear Stearns portfolio managers Ralph Cioffi and Matthew Tannin, who were similarly charged with defrauding investors.
They were acquitted in 2009 after the jury found the evidence to be insufficient and contradictory.
The difference is that it was a criminal case and carried a higher burden of proof.
“The government has come a long way since Tannin and Cioffi,” noted Bachner.
Lead SEC lawyer Matthew Martens told jurors yesterday that the only conclusion they can come to when reviewing the evidence is that Tourre intentionally misled investors over the 2007 transaction to “feed Wall Street greed.”
“It was a $1 billion fraud to feed Wall Street greed,” Martens told the jury. “Documents can’t tell lies, witnesses can,” Martens said.
Martens warned jurors that the defense team is underestimating them, betting that they can’t make sense of a jargon-filled case that tossed around complex financial terms.
Tourre took a big gamble that the jurors have heard enough from the ex-trader to make their decision.
“I’m going to talk a little bit about deceit and trickery, and it ain’t coming from that table,” said Tourre’s lawyer, Sean Coffey, pointing to the table where Tourre and his defense team sat during his closing.