UPDATE 1-US lawmaker says Goldman made Tourre "whipping boy"

Tue Apr 27, 2010 8:29pm EDT

* Senator says looks like Goldman sacrificed trader Tourre

* Says sets a bad tone about firm's approach to employees

* Blankfein stammers out a few defenses

(Adds Blankfein responses, comments from Coburn, Tourre, background, bylines)

By Karey Wutkowski and Steve Eder

WASHINGTON, April 27 (Reuters) - A top Republican lawmaker on Tuesday accused Goldman Sachs (GS.N) of making bond trader Fabrice Tourre "a whipping boy" as the firm defends itself in a high-profile civil fraud case.

Senator Tom Coburn, the top Republican on a Senate panel investigating Goldman Sachs, questioned the firm's motivation for releasing last weekend personal emails, written in 2007, between Tourre and his girlfriend.

"The tone set by that, if I worked for Goldman Sachs I'd be real worried that somebody has made a decision he's going to be a whipping boy, he's the guy that's getting hung out to dry. Nobody else had their personal emails released," Coburn said to Goldman Sachs Chief Executive Lloyd Blankfein.

Blankfein stammered through his response, saying first that, "I wasn't close to the decision."

He later said, "There were elements here that spoke badly to the firm, and we just wanted to come abreast of all the issues about which were bad to the firm."

After that, he said, "I don't think we added to the state of knowledge about those emails."

Goldman Sachs on Saturday released documents about the subprime mortgage crisis, countering allegations by the Senate Permanent Subcommittee on Investigations that it made a windfall by betting against the subprime market and put the firm's profits before client interests.

At the same time, Goldman released a series of messages from Tourre's work email address. They both talked about his thoughts that the collateralized debt obligation (CDO) market is "a little like Frankenstein turning against his own inventor" and about his desire to give his girlfriend a "gazillion kisses." [ID:nN25165850]

The Securities and Exchange Commission has charged that Goldman Sachs and Tourre fraudulently marketed an "Abacus" CDO by hiding vital information from investors, including the role that hedge fund Paulson & Co played in picking mortgage products tied to the CDO. Paulson & Co betted against the CDO.

The SEC revealed some emails from Tourre but did not include personal elements. The Senate panel also did not include Tourre's love messages.

"Is that a political ploy, or a defense ploy? Why would you do this to one of your own employees?" Coburn asked. "It had no investigative purpose."

Earlier in the day, Tourre told the Senate panel that the emails "reflect bad on the firm and on myself and I wish I hadn't sent these."

(Reporting by Karey Wutkowski and Steve Eder; Editing by Phil Berlowitz)

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