The SEC complaint against Goldman is a stunner. Stunning because Goldman had a 31-year-old flying about as close to the treetops as one can get without crashing. Or maybe Fabrice Tourre has indeed crashed now. If the SEC is right, Goldman’s Tourre put together a deal of CDOs with the mortgage pool handpicked by John Paulson, a guy who planned to position himself short on the securities Goldman would sell to its clients. Needless to say, the SEC complaint shows that Paulson chose dogs. But Fabrice was savvy enough to have a third party, ACA Management, actually structure the deal. The funny part is
that ACA folks, poor souls, were sending e-mails asking why Paulson would exclude Wells Fargo mortgages from the pool because, well, Wells was known for “quality” subprime mortgages. ACA (not charged with any violations) comes across in the complaint as a firm of singular integrity. It was asking all the right questions over and over again. It was seeking reassurance, and received it from Goldman’s team. The complaint tells a story of Goldman using a trusting firm, relying on Goldman’s reputation, to distance itself from Paulson.
If the SEC is correct, Goldman was running the casino and using an eye-in-the-sky to figure out any hand played by its patrons. Gambling does give the house a leg or two up anyway (how apt the analogy is when you consider what CDOs via subprimes really were), but the SEC complaint paints a picture of investors never having a chance.Â
Goldman’s lawyer indicates the firm will fight the charges and insists the facts and law are on their side. He does have a point. This is an e-mail case, and proving intent is a tall order. In other words, Fabrice and Goldman may not have violated the law. But the complaint still makes you shake your head and click your tongue. Whether Goldman did or did not commit securities fraud is really not the issue. These folks were fooling around with capitalism by compromising the trust investors place in Wall Street. Without trust, folks no longer ante up.  Congress is poised to regulate, and with or without guilt, Goldman has made the case for regulation. That’s a pity.  A pity because we had all the regulation we needed and it wasn’t complex: Don’t steal.  A go-between cannot cleanse a fixed deal. And it surely looks, from the SEC complaint, that Fabrice masterminded a fixed deal. What Goldman did was perhaps not fraud, but it is a tragedy for all of us.
About mmjdiary
Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD.
The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards.
Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio.
She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News.
In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles.
Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
