Yesterday, I critiqued Andrew Ross Sorkin’s column (Dealbook’s Sorkin Blows The Return of the Fabulous Fab) for a variety of journalistic sins.

Within that screed was the observation that “No, this is not a referendum on Goldman Sachs. I do not believe ANYONE at the SEC believes this simple 10b-5 case is about anything other material misrepresentations in the sale of a security.”

According to a new article in the NYT, S.E.C. Hopes for Validation in Goldman Sachs Trader Case, that last sentence is incorrect.

“The rarity of the trial underpins its importance . . . For the S.E.C., an agency still dogged by its failure to thwart the crisis, the trial is a defining moment that follows one courtroom disappointment after another…

“Their reputation for trying cases hangs in the balance,” said Thomas A. Sporkin, who was a senior S.E.C. enforcement official until last year when he departed for the law firm Buckley Sandler. “This is their opportunity to show Wall Street that they can prevail against an individual at trial.”

I told Andrew yesterday that if there were any indications the SEC thought this small, 10b5 fraud int he sales of a security was anything other than a simple unimportant case, one that really mattered, I would apologize in writing.

As the quote above makes clear, the SEC apparently does think this case is significant. Perhaps more about their court room litigation prowess than making it the key financial crisis trial, but still this case matters to them.

I am a man  of my word, and I must concede that on this narrow issue, Sorkin was right, and I was wrong (consider this your public apology!).

However, all my other 10b-5 contentions remain valid — this is a simple fraud case:

“At the heart of the agency’s case is the contention that in 2007 Mr. Tourre and Goldman sold investors a mortgage security, known as Abacus, without disclosing a crucial fact: a hedge fund run by the billionaire John A. Paulson helped construct Abacus and then bet against it. The S.E.C. cited Goldman for “misstating and omitting key facts” about Mr. Paulson’s involvement. When the mortgage market soured, a German bank and a handful of other sophisticated investors lost more than $1 billion on the deal.”

That is what the trial will turn on, it is what the jury will determine, and it is what will determine the Fabulous Fab’s future career.

 

Previously:
Dealbook’s Sorkin Blows The Return of the Fabulous Fab (July 9th, 2013)

Sources:
S.E.C. Hopes for Validation in Goldman Sachs Trader Case
BEN PROTESS and SUSANNE CRAIG
NYT, July 8, 2013
http://dealbook.nytimes.com/2013/07/09/s-e-c-seeks-validation-in-goldman-sachs-trader-case/

Trader’s Day in Court May Lack Some Details
ANDREW ROSS SORKIN
NYT, July 9, 2013
http://dealbook.nytimes.com/2013/07/08/traders-day-in-court-may-lack-some-details/

 

Category: Financial Press, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “WTF?! The SEC Thinks Fabulous Fab Case is Important?”

  1. rd says:

    Classic misdirection, similar to what magicians do.

    Lots of pomp and circumstance about minimal cases to divert attention from the fact that nothing is being done (even investigations) about the important stuff.

    At the end of SEC press conferences they should run the standard types of credits that you get on TV – “This comedy show was brought to you by the fine folks at TBTF financial corporations and was taped in front of a rigor mortis audience.”

  2. alonzo says:

    Doing the right thing when you’re right is effortless. Doing the right thing when you’re wrong is convincing.

  3. rd says:

    This was an interesting little opinion piece in WSJ this morning by James Giddens, an MF Global bankruptcy trustee.

    http://online.wsj.com/article/SB10001424127887324766604578458624010464206.html

    This sentence was fascinating: “In my investigation—as trustee for MF Global’s U.S. broker-dealer and futures-commission merchant—I found that there were discussions inside MF Global’s executive suite about how to exploit the difference between “segregated” and “secure” funds.”

    As far as I can tell, Corzine can’t be criminally prosecuted because he intended to essentially misappropriate “segregated” funds legally by shifting them between countries. However, due to their incompetence, they probably misappropriated them illegally but since that was not their intent, they are not criminals.

    I ams still baffled about how this case has not turned into a SarbOx criminal case for Corzine and the handful of other top execs since it is pretty clear that the accounting of their money movements did not match what they thought they were going to do.

    • RW says:

      IMHO, if SEC and DOJ were serious about control fraud at the top executive level they could have filed and successfully litigated thousands of SarBox cases since 2007 …at least one would think so …if they were serious.

  4. Oral Hazard says:

    Hmm… the current version of yesterday’s post on Sorkin’s story seems different than I remember it for some reason… Is Ball a brand of mouthwash that objected to your product placement? ;-)

    • No, I decided to remove the ad hominem

      The original Sorkin article is still awful — but he did get that one thing right

      • Frwip says:

        Sorkin got the state of mind with the SEC correct, which is the point of access journalism.

        It doesn’t mean anything about the reality of the case.

        I’m with rd (and your first version). The SEC is giving us a grand show of toughness and gritted teeth on what is in reality a fairly trivial and inconsequential case, while seating on their hands for the not trivial nor inconsequential cases.

  5. Rich in NJ says:

    Who was the last truly distinguished Attorney General? Elliot Richardson, Eugene Levy?

    • rd says:

      The Attorney General office does not really lend itself to truly distinguished people. The few that aren’t weeded out in the selection process soon get weeded out on the job.

  6. Oral Hazard says:

    Barry, admitting when you are wrong is one of the reasons a lot of us keep coming back.