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Paolo Pellegrini, the man with the $45 million checking account balance at the middle of the Goldman Sachs case

Goldman Sachs Group, Inc.

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Imagine checking on the joint checking account you share with your husband and seeing a balance of $45 million.

That's what the wife of Paolo Pellegrini saw on her 2007 vacation with her husband, who has emerged as a key figure in the SEC fraud charge against Goldman Sachs. Pellegrini, the SEC says, was the point man for John Paulson, the man who asked Goldman Sachs to assemble an investment vehicle so he could bet on the housing collapse.

According to this very good story in today's Wall Street Journal, Pellegrini was a bit of a Wall Street washout until Paulson hired him in 2004.

It was Pellegrini who, on Paulson's assignment, did the research that showed housing prices were inflated and likely to crash, and the two figured out how to try to make money on that fact. It needs to be noted that Pellegrini has not been charged with anything and that he has cooperated with the SEC.

According to the Journal's story:

"Messrs. Paulson and Pellegrini turned to Wall Street to ask various firms to create pools of debt, known as collateralized debt obligations, backed by subprime mortgages so that the Paulson team could buy this insurance protection on them. Mr. Pellegrini was the point man for the hedge fund in its conversations with Goldman Sachs banker Fabrice Tourre regarding the [collateralized debt obligations] deal at issue in the SEC complaint. The SEC alleges that Mr. Tourre, a named defendant in the SEC case, was 'principally responsible' for the deal."

After the housing bubble burst and the financial crisis rolled across the economy, Paulson's bet paid off. He raked in $20 billion. Pellegrini's bonus for his part of the deal was $175 million. This is where I'll pick the Journal's story back up:

"For Mr. Pellegrini, 53-years-old, who now runs his own hedge fund after leaving Paulson just over a year ago, the trade has worked out well. In late 2007, he took his new wife on vacation in Anguilla, an island in the West Indies. Stopping at a cash machine in the hotel lobby to withdraw some cash, she checked the balance of their checking account. On the screen was a figure that startled her: $45 million, newly deposited in their joint account. It was part of Mr. Pellegrini's $175 million bonus that year."

That should have made for an interesting conversation between husband and wife.

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By Frank Ahrens  |  April 19, 2010; 4:35 PM ET
Categories:  The Ticker , Wall Street  | Tags: Business, Collateralized debt obligation, Goldman Sachs, Hedge fund, John Paulson, Paolo Pellegrini, SEC, Wall Street, Wall Street Journal  
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I'll see your $45 million honey and raise you $45 million and we'll bet everything on this thing. I think I'd use travelers checks myself and drop the plastic card bit. With paper nobody knows what's going on or how long it's been going on. I never trust cash machines.

Posted by: tossnokia | April 19, 2010 5:58 PM | Report abuse

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