Fabrice Tourre, a central figure in a controversial Goldman Sachs transaction, asked a judge to throw out a U.S. regulator’s fraud lawsuit against him, 2-1/2 months after the bank settled its part of the case for $550 million.
Citing a recent U.S. Supreme Court ruling, Tourre said the U.S. Securities and Exchange Commission case must be dismissed because the 2007 “Abacus” transaction, which involved collateralized debt obligations tied to subprime mortgages, took place outside the United States.
The Supreme Court, in the case Morrison v. National Australia Bank Ltd, ruled in June that Australian shareholders who bought that bank’s stock outside the United States could not raise securities fraud claims in U.S. courts.
Several judges have since applied the ruling to bar U.S. lawsuits in other scenarios, including where the plaintiffs are not foreign investors.
The SEC lawsuit accused Goldman and Tourre, a vice president, of misleading investors about Abacus by failing to reveal that the hedge fund Paulson & Co helped choose the underlying securities and bet against them.
In a filing late Wednesday in Manhattan federal court, Tourre said Abacus did not involve a purchase or sale in the United States or a security listed on a U.S. exchange, as required under Morrison’s “transactional test.”
Citing 10 million pages of documents the SEC turned over in August and September, he said the CDOs were not listed on any exchange, and their sole investor was Germany’s IKB Deutsche Industriebank AG, which invested overseas.
The Morrison ruling “makes clear that the antifraud provisions of the federal securities laws can be applied if, and only if, the securities transaction at issue takes place in the United States,” Tourre said.
“The complaint fails,” he added.
SEC spokesman John Nester declined to discuss the filing. He said the agency plans to file a response within 14 days. Pamela Chepiga, a partner at Allen & Overy LLP who represents Tourre, declined to comment, her assistant said.
Tourre remains a Goldman employee but is on paid leave, spokesman Michael DuVally said on Thursday.
Goldman settled with the SEC on July 16 without admitting wrongdoing. U.S. District Judge Barbara Jones approved that accord and is handling the Tourre case. Tourre is the only Goldman employee sued individually by the SEC.
The case is SEC v. Goldman Sachs & Co et al, U.S. District Court, Southern District of New York, No. 10-03229.
