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Wednesday, April 21, 2010

Fabrice Tourre Should Stay Quiet

Reports today that Goldman Sachs vice president Fabrice Tourre, the one individual charged so far by the Securities and Exchange Commission in its civil suit against Goldman, will testify before the Senate Finance Committee next week. Tourre reportedly was "invited" to testify prior to the civil suit, but surely knew he was a target of the investigation (as Goldman received its "Wells Notice" back in 2009).

Why would Tourre say anything? He undoubtedly has the risk of civil and potential criminal liability. This is compounded by the political climate and a climate in which the S.E.C. wants to redeem its reputation. Tourre's head will fit nicely on someone's mantle; indeed, any head will do. Moreover, as one report indicates, Goldman is already trying to portray its young executive as a "lone wolf" investment banker, indicating to Tourre that he is being thrown under the bus.

Perhaps -- just perhaps -- Tourre may be thinking about "cooperating" in the civil probe, or any unannounced criminal probe. (There can be no certainty either way; the uncertainty should not be used to point to Tourre's theoretical and as yet totally speculative criminal culpability in any way.). But then why testify? Why give the other side (in any action) any advantage of knowing what you will say? Plus, there is a record, as testimony would be on the record.

If Tourre is testifying because he is worried about his reputation, I would think this is a situation where he has to bite his tongue and bide his time. There will be a calmer time during which he can tell his side, and the current witch hunt madness may not be optimal.

If Tourre does testify, I think it may show great confidence in his story. Nevertheless, when someone is out to get you, it may be prudent to be quiet and lay low. It's not as if he won't have further opportunities to talk, just that now is not optimal in my opinion.

For conspiracy theorists who think his testifying is a Machiavellian way to generate legal fees (by exposing him to trouble in order to then bill time on the rescue), be advised that I think his lawyer is definitely not among that subspecies of unethical lawyers who put personal interests ahead of clients.  Reportedly, Tourre is being represented by prominent white collar defense lawyer Pam Chepiga, of Sullivan & Cromwell. Chepiga and her firm are among the best reputationally.   Nonetheless, Tourre -- and others similarly situated -- would do well to make sure that they are the ones paying the legal fees and choosing their counsel, not their employers and certainly not the D&O insurance carriers, so they can be more assured that their counsel is in fact putting their interests first and not the interests of the entity actually writing the check.

Eric Dixon is a New York attorney with a background in securities regulation.  He investigates complex matters in a variety of fields.   For further comments or inquiries, he can be reached at 917-696-2442 or at

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