The cast of characters in the Goldman case
The SEC's fraud charge against Wall Street megabank Goldman Sachs is a complicated story with a growing cast of interesting characters. I've mentioned most of them but figured it would make sense to put them all in one place. As they say, you can't tell the players without a scorecard:
Lloyd Blankfein: the chief executive of Goldman. He's 55 and has essentially been a Goldman lifer, taking over the company in 2006. Along with J.P. Morgan Chase's Jamie Dimon, Blankfein may be the most powerful banker on Wall Street. He has been a moderate voice for reform in the wake of this financial crisis, saying in public appearances that all banks made mistakes, especially in over-leveraging, and Goldman wants to be part of the reforms going forward. The alternative is not having a seat at the financial regulatory reform table and getting hammered with punitive regulations. He has taken significant compensation cuts to attempt to ward off bad press, taking home $862,000 last year.
Fabrice Tourre: the 31-year-old French Goldman executive who built the synthetic collateralized debt obligation (CDO) that brought the SEC charge. Little is known about Tourre -- who, according to Goldman, is now on paid leave -- other than that he referred to himself as the Fabulous Fab and threw lavish parties in his New York apartment. He is being charged along with Goldman by the SEC. You should not be surprised by Tourre's youth. Firms such as Goldman revel in discovering what they believe to be the brightest young minds in finance and giving them the reins to billion-dollar investments, reinforcing their best-and-brightest image on Wall Street. Andy Fastow, the key government witness in its case against collapsed energy trader Enron, was in his mid-30s when he was on the rise at that company.
John Paulson: First off, he's no relation to former Goldman chief executive and former Treasury secretary Hank Paulson. John Paulson made billions by betting against the housing bubble. Here is a terrific story from the Wall Street Journal describing how Paulson decided to bet against the housing market by creating debt pools. Paulson is 55 and graduated tops in his classes at NYU and Harvard Business School. He became a legendary hedge fund manager on Wall Street and had $36 billion under management in 2008. Paulson is the man who approached Goldman about creating a CDO that would allow him to bet against the bubble.
Paolo Pellegrini: He was in the process of washing out on Wall Street when he persuaded Paulson to give him a job in 2004. Paulson assigned him the job of trying to figure out where housing prices were headed. After researching the sector, Pellegrini became convinced it was headed for a bust and he helped Paulson devise the idea of a CDO where they could bet against housing prices. He has cooperated with the SEC and is not being charged.
ACA Management: This is the independent third party Goldman said it used to pick the investments in the CDO Paulson wanted to build. However, the SEC says that ACA worked hand-in-hand with Paulson lieutenant Pellegrini. Goldman counters that ACA tossed out several investments Pellegrini wanted to include. “Although ACA received input from both Paulson and IKB [a German bank], ACA had sole responsibility for determining, and did determine, the final portfolio and was paid a fee for performing that role,” Goldman co-counsel Greg Palm said in the company's earnings call this morning. “ACA used proprietary models and methods of analysis to develop its own independent view of the relative riskiness of each security. To that point, ACA rejected more than half of the securities suggested by Paulson.”
Robert Khuzami: the top prosecutor for the SEC who brought the charge against Goldman. Khuzami, a former New York prosecutor, formed a new team at the SEC, which has been accused of being a step behind smarter Wall Street financial engineers. Khuzami's team investigates potential wrongdoing at hedge funds and mutual funds and firms that trade in derivatives. Khuzami has been on the job for only a little more than a year, brought in after the SEC famously missed admitted Ponzi schemer Bernie Madoff, despite multiple warnings.
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April 20, 2010; 12:36 PM ET
| Tags: Collateralized debt obligation, Goldman Sachs, Harvard Business School, Hedge fund, JPMorgan Chase, John Paulson, SEC, Wall Street
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