Wasn’t Misled
Tourre claimed he never intended to mislead anyone in the Abacus deal. And Coffey attacked the government for failing to show that any claimed misrepresentations by Tourre made a difference to ACA or to investors in the deal. He argued that ACA knew Paulson planned to short Abacus and wasn’t misled. ACA would have applied the same standards to selecting a portfolio regardless of whether Paulson had a short position, he said.
“This was one of the strongest portfolios that ACA had ever constructed,” Coffey said, not one that was “designed to fail,” as the SEC repeatedly claimed. Coffey said the Abacus portfolio went “off the cliff” after July 2007 as a result of a change in rating company standards, along with every other CDO based on subprime home mortgages.
Coffey argued that ACA had worked on other deals with hedge funds that pursued a long-short strategy, going long on part of a deal’s capital structure while making short bets against other tranches. The evidence belied the testimony of former ACA chief executive Alan Roseman, who told jurors that his belief that Paulson was taking a long position in Abacus was “critical” to ACA’s participation.
Esoteric Matters
Throughout the trial, some of the jurors appeared distracted or drowsy as witnesses were questioned about esoteric financial matters including the workings of CDOs and credit default swaps.
They appeared more engaged when the testimony turned to Tourre’s late-night e-mails to his then-girlfriend and the difference between smiling and winking emoticons.
Martens sought to address the less-than-thrilling nature of much of the testimony during his closing argument.
“Admittedly,” the SEC lawyer told jurors, “the proof might not have been that exciting.”
The case is SEC v. Tourre, 10-cv-03229, U.S. District Court, Southern District of New York (Manhattan).