Goldman Sachs' 'Fabulous Fab' Tourre Hung Out to Dry?

July 22, 2010— -- Soon after the Securities and Exchange Commission announced July 15 that it had reached a $550 million fraud charge settlement with Goldman Sachs, shares of the bank soared. Analysts immediately scored it a victory for CEO Lloyd Blankfein.

Meanwhile, back at the SEC's Washington, D.C. headquarters, as a press conference was winding down, Lorin Reisner, the agency's deputy director of enforcement, made it clear the bombshell case was not entirely closed.

Fabrice Tourre, a Goldman vice president and the firm's only employee singled out in the SEC's civil securities fraud complaint, was still on the hook. "There is no settlement with Mr. Tourre," Reisner said. "We are proceeding with that case."

What's more, he added, Goldman has agreed to cooperate in the case against Tourre, who is better known on Wall Street as "Fabulous Fab," a moniker he gave himself in a now infamous email obtained by regulators.

Getting Goldman to agree to cooperate in the SEC case against 31-year-old Tourre (pronounced "Tour") may seem like a whale hunter flipping its prey to extract a barnacle, but in the financial world the curious legal twist is being interpreted as a boldface attempt by regulators to send a message: individual bankers and traders will be held liable for their actions.

In its complaint, the SEC alleges Tourre deliberately misled investors in a complex mortgage-linked derivative deal.

However, there's another possible scenario playing out here, according to Harvey Pitt, former SEC Chairman and now the CEO of Washington, D.C.-based corporate strategy consultants Kalorama Partners. "This isn't about the SEC sending a message," Pitt said. "My sense, and I have no way of knowing, is that Tourre likely would have been presented an opportunity to piggyback on the settlement but for whatever reason he or his lawyers chose not to."