By Joseph Ax
NEW YORK Dec 6 Former Goldman Sachs Group Inc
trader Matthew Taylor was sentenced Friday to serve nine
months in prison and pay $118 million in restitution to his
former employer after he pleaded guilty to pursuing an
unauthorized $8.3 billion futures trade in 2007.
In imposing a sentence well below the 33- to 41-month term
the U.S. Department of Justice had recommended, U.S. District
Judge William Pauley in New York castigated both Goldman and
government authorities for failing to immediately address
Taylor's conduct when it occurred.
The case is a "paradigm of everything that is wrong with
Wall Street and the regulators charged with protecting the
public," Pauley said.
Prosecutors claimed Taylor lied to supervisors and
fabricated trades in December 2007 to conceal an $8.3 billion
position in Standard & Poor's 500 e-mini futures contracts,
which bet on the direction of that index. Goldman fired him
The bank had sought the $118 million to cover its losses on
the trade, a request the U.S. Department of Justice supported,
though it is unlikely that Goldman will collect.
Taylor, a married father of two, has moved to Florida, where
he and his wife have started a pool cleaning business.
"We've tried to rebuild our lives far from Wall Street,"
Taylor, who turns 35 on Jan. 1, told Pauley. He pleaded guilty
in April, a day after turning himself in to authorities.
He was previously fined $500,000 by the U.S. Commodity
Futures Trading Commission.
Goldman itself paid a $1.5 million civil fine last December
to settle CFTC charges that it failed to adequately supervise
Taylor, an amount that Pauley said it earned back in a "couple
of minutes" given its more than $7 billion in annual profits.
Pauley also faulted Goldman for simply firing Taylor without
disclosing the full extent of his cover-up.
"Astonishingly, Goldman then watched as one of its
competitors, Morgan Stanley, rehired Taylor," Pauley said.
But the judge saved some of his harshest words for the
government, criticizing regulators and prosecutors for failing
to investigate Taylor for years and then claiming credit in the
media when they finally did.
"It cannot be called justice or oversight when it took the
government six years to bring a rogue trader to justice, when
the trader admitted his conduct on Day 1," he said. "At some
point, the justice needs to be swift if it's going to mean
anything, other than another press release and the ability to
say, 'another pelt.'"
The office of Manhattan U.S. Attorney Preet Bharara and the
CFTC declined to comment on Pauley's remarks. But a person
familiar with the criminal investigation said prosecutors only
first became aware of Taylor's conduct last November after
seeing a news report about the CFTC probe.
In a statement, a Goldman spokesman said the bank had
disclosed in a filing with the Financial Industry Regulatory
Authority that Taylor was fired in 2007 for "inappropriately
large proprietary futures positions in a firm trading account".
Pauley said Taylor is a "brilliant and talented" man who
made a series of terrible decisions, and while he did not
deserve years in prison, the judge concluded that a short
sentence of imprisonment was necessary.
"Everything about this case is sad," Pauley said. "Your
employer's response was sad. Your conduct is sad. The
government's conduct is sad.
"Undoubtedly, they'll issue another press release," he
added. As of 5 p.m., Bharara's office had not yet fulfilled that
The case is U.S. v. Taylor, U.S. District Court, Southern
District of New York, No. 13-cr-00251.