Four months after being found liable for defrauding investors in a soured mortgage deal, Fabrice Tourre now faces a stiff financial penalty for his actions.
The Securities and Exchange Commission disclosed on Monday that it is seeking $910,000 in fines against Mr. Tourre, a former Goldman Sachs vice president whose defeat handed the government its first big legal victory in a case arising from the financial crisis.
The government is also seeking the forfeiture of $175,463 in ill-gotten gains, along with $62,858.03 in interest.
The onetime financier, 34, faces a significant fine for his part in a failed investment that has become one of the most enduring symbols of the 2008 financial crash. He was found liable for six of seven counts of civil fraud.
“Tourre’s conduct helped cause more than one billion dollars in losses. He was rewarded with the largest bonus he had ever received,†lawyers for the S.E.C. wrote in a court filing on Monday, arguing in favor of the stiff penalty. “Severe misconduct must have consequences, particularly when the consequent financial loss is of such great magnitude.â€
A spokesman for Mr. Tourre did not have an immediate comment.
The three-week trial was notable for being one of the few that the S.E.C. pursued. The agency has instead settled most of the cases it brought related to the financial crisis and has not charged a top executive at a large bank with fraud.
But it pursued Mr. Tourre vigorously, assigning high-level officials at the commission to handle the matter. That has prompted critics to question why it expended so much effort against a young trader who was just 28 at the time in question.
Under federal securities law, Mr. Tourre faced penalties ranging from $5,000 to as much as $130,000 for each violation. But the judge overseeing his case, Katherine B. Forrest of Federal District Court in Manhattan, will have final say on the payouts.
The fines are separate from what Goldman has paid to the government for its actions in constructing and selling the mortgage investment, formally known as Abacus 2007-AC1. Goldman settled with the S.E.C. three years ago for $550 million, a record fine at the time.
But it was Mr. Tourre who, as a young midlevel employee at the Wall Street firm, became the most prominent face of the Abacus deal. Reams of documents and embarrassing emails â€" including one infamous message referring to a friend’s nicknaming him the “Fabulous Fab†â€" became the cornerstone of the government’s case, one built on the argument that the trader was the personification of greed.
At the heart of the prosecution’s argument was that the trader failed to disclose that the Abacus investment was constructed with the help of a hedge fund, Paulson & Company, that had bet the deal would fail. The transaction ultimately yielded a windfall for Paulson.
The S.E.C.’s lead prosecutor angrily denounced the trader during the trial as living in a “Goldman Sachs land of make-believe†where deceiving investors is not fraud.
By contrast, Mr. Tourre’s lawyers argued that their client was made the scapegoat for the entire financial crisis. They argued that supervisors at Goldman approved the deal, and that the firms participating in Abacus were experienced investors who knew that such a trade required one side to bet that it would succeed and another to wager that it would fail.
Ultimately, however, the jury concluded that Mr. Tourre had misled investors, even if some members felt that he was being made into an example for the industry.
In their court filing, the S.E.C. lawyers wrote that the former trader should bear the full financial brunt of his penalty and strongly argued against Goldman paying any part. Though he stood trial on his own, his former employer has paid for his lawyers and other advisers, and some have speculated that it would be willing to help defray at least some of the punishments that he might face.
But the commission insisted that Mr. Tourre be forbidden from accepting any kind of reimbursement from the firm, describing such fines as “designed both to ‘punish the individual violator and deter future violations of the securities laws.’â€
“The deterrent impact of this case will be undermined†if Goldman is allowed to pay the penalty, the filing continued.
It is unclear whether Mr. Tourre has the resources to pay a significant fine. He abandoned his Wall Street career several years ago in favor of working on a doctoral degree in economics at the University of Chicago.
Lawyers for Mr. Tourre are expected to respond to the government’s motion next month, and Judge Forrest is scheduled to decide upon the final penalty by February.
Mr. Tourre has also laid the groundwork for an appeal of his case, citing a lack of sufficient evidence to support the jury’s findings.
