SEC 1, Tourre 0, Goldman 0, Financial Press -1

Today's jury verdict finding Fabrice (the "Fabulous Fab") Tourre liable on six of the seven civil counts against him represents a major victory for the SEC.  That's not simply because of the prominence of the case, which involved the sale of a controversial motgage-backed derivatives investment and is the highest profile SEC enforcement action to come out of the 2008 financial crisis.  It's because the agency's very efficacy has been under attack for the better part of a decade.  Widely viewed as ineffectual, the SEC has re-established its presence as a cop on the beat.  While one victory doesn't win the war, a victory this big will make a lot of corporate and white collar defendants think harder about settling, even if the price involves admitting to making bad choices.

Fabrice Tourre rolled the dice and lost.  Litigation is a gamble, and some bets turn out to be losers.  Perhaps he chose to fight instead of settling up front because he was angry about being a lower level guy who was singled out as a named defendant.  But anger doesn't equate to victory in court.  Above all, what matters is the evidence.  Tourre may have been his own worst enemy, seemingly adding insouciance as too much of a fillip to his e-mails.  Most likely, his attorneys will soon make motions for this and that, and perhaps later file appeals.  But now that the jury has spoken, Tourre faces an uphill battle.

Goldman Sachs wasn't a party to the case.  But it reportedly financed Tourre's defense.  And perhaps it has reasons beyond loyalty to a former employee.  Goldman faces potential liability in private civil lawsuits involving charges similar to those in the SEC case.  If Tourre had won, Goldman might have negotiated more favorable settlements in those cases.  Now that he's lost, GS has shifted closer to the 8-ball.  But that's all just a matter of money, of which GS has a fair pile.  GS isn't going to be kicked out of the securities business, as Tourre might be, because GS already settled with the SEC, thereby capping its regulatory liability.   Now that he's been held liable by a jury, Tourre not only faces SEC sanctions, but perhaps demands for payment from the plaintiffs' attorneys in those private civil lawsuits as well.  Poor Fab.  Not so fabulous any more.

The financial press ends up looking silly.  Not one publication of any prominence, to this writer's knowledge, predicted the SEC's victory.  Many expressed serious doubt about the SEC's case.  The coverage during the trial was frequently skeptical of the SEC's evidence and efforts.  It might be interesting to know why the press coverage was so imbalanced.  Whatever the reason, the press was scooped by the SEC staff, which convinced the jury to announce the real story.