The Goldman Sachs employee at the centre of allegations that it misled buyers of a complex credit instrument has taken temporary leave from the bank.

A spokeswoman for Goldman said that Fabrice Tourre, 31, who worked for the bank in New York until he moved to London in 2008, had taken a “personal decision to take a bit of time off”. She said that he was still employed by the bank and had not been suspended.

Goldman Sachs had concluded in an internal investigation that Mr Tourre had done “nothing wrong”, the spokeswoman said.

The Financial Services Authority in Britain has begun a preliminary investigation into the bank regarding allegations of fraud filed by the US Securities and Exchange Commission (SEC) last week.

It is understood that the FSA’s investigation is a preliminary fact-finding mission rather than formal referral to its enforcement division. The regulator is expected to assess whether offences were carried out in the UK divisions of the bank. It is co-operating closely with the SEC.

Gordon Brown has asked the FSA to begin an investigation after the SEC filed a $1 billion lawsuit against the bank and Mr Tourre, one of its vice presidents.

Royal Bank of Scotland, which is 84 per cent-owned by the UK taxpayer, appears to have been one of the biggest losers from the alleged fraud.

The Prime Minister also accused the Goldman of “moral bankruptcy” over plans to award up to £3.5 billion in bonuses to its staff for three months’ work. The bank is due to announce its results for the first quarter tomorrow.

Goldman Sachs today attempted to reassure clients that it was innocent of fraud allegations filed on Friday that claim it missold complex financial instruments.

The bank said that it would never condone one of its employees misleading investors or clients. In a letter to investors it said: “We do take our responsibilities as a financial intermediary very seriously and believe that integrity is at the heart of everything we do.

“Were there ever to emerge credible evidence that such behaviour occurred here, we would be the first to condemn it and take all appropriate actions.”

Markets in Britain, Europe and Asia fell this morning as investors took fright at the potential impact of the lawsuit, as well as the disruption across Europe caused by the ash cloud from Iceland’s volcanic eruption.

Goldman Sachs said: “This particular transaction has been the subject of SEC examination and review for over 18 months. Based on all that we have learnt we believe that the firm’s actions were entirely appropriate, and will take all steps necessary to defend the firm and its reputation by making the true facts known.”

Goldman Sachs repeated today that it had lost $90 million on the financial instruments — known as collateralised debt obligations — which it allegedly used to “bet against” clients.

Lawyers yesterday predicted that the lawsuit would prompt a flood of litigation.

Richard Blumenthal, the Connecticut attorney-general, said that he had begun a review of the case. “A key question is whether this is an isolated incident or part of a pattern of investment banks colluding with hedge funds to purposely tank securities they created and sold to unwitting investors,” he said.

 

Source: The Times 

 

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