Goldman Sachs' Fabrice 'Fabulous Fab' Tourre: Wall Street's Fall Guy?

April 21, 2010 — -- French trader Jerome Kerviel. Former Dick Cheney chief of staff Scooter Libby. Former Marine Lt. Col. Oliver North.

They are the notrious names inextricably linked to some of the biggest scandals in the post-Watergate era, but they have more than that in common: They're also all suspected of being fall guys -- individuals who got the blame not just for their own wrongdoing but for the transgressions of their superiors.

Fabrice "fabulous Fab" Tourre, the only Goldman Sachs employee named in the Securities and Exchange Commission's lawsuit against the firm, is scheduled to testify before the Senate Permanent Subcommittee on Investigations on Tuesday, April 27, Bloomberg reported.

Is Tourre next to join history's gallery of supposed scapegoats?

Some say yes.

"In this case, Wall Street's offering up, essentially, a 31-year-old kid," said Bill Bartmann, the president of investment advisory firm Bartmann Enterprises and a former Goldman client. "I regret anybody going through the circumstances under which he's about to suffer."

The SEC's complaint alleges that Tourre, then a vice president at Goldman, commited fraud by failing to disclose to investors that a hedge fund that helped choose the mortgage-backed securities going into a Goldman-structured investment was the same hedge fund betting against that deal. The hedge fund involved, Paulson & Co., ultimately reaped a $1 billion profit while the deal's investors lost more than $1 billion.

Goldman Sachs has denied the fraud claims.

When asked during a conference call last week why the SEC didn't pursue charges against higher-ranking Goldman executives, SEC enforcement director Robert Khuzami responded, "We charged those that we felt appropriate based on the evidence and the law."

Tourre, Khuzami said earlier during the call, "was the person principally responsible for structuring the deal."

But critics like Bartmann say Tourre must have shared responsibility with someone.

"That whole proposition was handled by a relatively large committee of people," he said. "There are senior managers, senior executives at Goldman who are involved in the decisionmaking process."

Some argue that the SEC's charges against Tourre are egregious because the alleged fraud case itself is flimsy. The investors hurt by Goldman's alleged fraud, they say, were sophisticated companies that knew of the securities chosen for the ABACUS deal and that also knew that someone would bet against the deal.

"There's just not much there," said a veteran derivatives expert who asked not to be named. "The idea that some poor guy has his name attached to something that's this weak -- it's really a shame."