| NEW YORK, June 19
NEW YORK, June 19 A federal judge on Wednesday
limited the extent to which former Goldman Sachs Group Inc
vice president Fabrice Tourre can argue that he was
acting on the advice of company lawyers in his defense against
charges that he misled investors.
The ruling could be another setback for Tourre ahead of his
trial on July 15, after the judge earlier this month rejected
his argument that the U.S. Securities and Exchange Commission
should narrow its case against him.
The government accuses Tourre of failing to tell investors
in a collateralized debt obligation (CDO) known as Abacus that
hedge fund Paulson & Co had helped choose the underlying
mortgages and then bet against it.
In a written ruling on Tuesday, U.S. District Judge
Katherine Forrest said she would "limit Tourre's ability to
focus on the presence and participation of lawyers" at his
Forrest said Tourre's opening arguments should not include
references to the presence and involvement of lawyers at
meetings where Abacus was discussed. She also said she would
provide a "limiting instruction" preventing his defense lawyers
from referring to lawyers in a way that suggests Tourre relied
on them to vet the Abacus transaction.
But, she stopped short of precluding Tourre's lawyers from
presenting any evidence that showed the presence of lawyers,
which the SEC had requested.
"In short, Tourre will not be precluded altogether from
saying the words 'counsel,' 'lawyer,' or 'attorney,'" Forrest
wrote in her decision. "But nor will he be permitted to zero in
on the presence or involvement of lawyers for the sake of
highlighting their presence or involvement."
At a hearing on Friday, the SEC had asked the judge to
preclude Tourre from presenting an "advice of counsel" argument
in which the approval of the transaction by attorneys at Goldman
and other entities involved would essentially shield him from
fault. Goldman agreed to pay $550 million to settle its part of
the case, without admitting wrongdoing, in 2010.
The SEC has said that internal memos, emails and other
evidence showing that lawyers approved the CDO could create the
false impression that Tourre had disclosed to them the full
extent of Paulson's involvement.
Tourre's lawyers, meanwhile, said that their client did not
intend to use an "advice of counsel" defense. They contend that
Tourre thought Goldman's "institutional processes," such as
approval of the CDO by various Goldman committees, ensured
adequate legal review of the CDO.
In her decision on Tuesday, Forrest green-lighted that line
"Tourre will be allowed to present evidence tending to show
that he was not the person primarily responsible for the
transaction and that the transaction occurred in the context of
a sophisticated financial institution," Forrest wrote.
Lawyers for Tourre declined to comment.
A representative for the SEC did not immediately respond to
a request for comment.
The case is SEC v. Tourre, U.S. District Court, Southern
District of New York, No. 10-03229.