Goldman’s Lawyers Failing to Disclose?

This story in the New York Times appears to reveal an interesting nugget, if it’s true. Aside from the lesson of erasing your hard drive before throwing it in a random public dumpster in the New York City, the article tells the story of Fabrice Tourre who is the young investment banker currently being prosecuted for civil fraud by the SEC, the only named individual sued as a result of the SEC’s investigation of the Abacus line of mortgage backed investments offered by Goldman Sachs a few years ago. His laptop contained information related to his defense and, even after it was found in a dumpster, continued to received e-mail correspondence related to the case.

This excerpt makes it sound as though Goldman’s attorneys have not advised him of the potential conflict of interest inherent in representing him in this proceeding and Goldman and/or its lawyers have failed to make clear that Tourre could (and should) seek out his own attorney:

In April 2010, when the S.E.C. filed its case against the bank and Mr. Tourre, the young banker told friends that he believed Goldman had been chosen to be the commission’s “case study,” according to several who spoke on the condition that they not be identified. The friends also said they were concerned that Mr. Tourre’s dependence on Goldman for advice and legal counsel was not in his best interest.

In September 2009, for instance, Mr. Tourre told friends he thought he had to use a lawyer from a list of lawyers at three firms that Goldman gave him.

Robert Follie, a lawyer in Paris, said Mr. Tourre told him he was not authorized to use lawyers other than those Goldman selected. Mr. Follie said he cautioned Mr. Tourre that his interests might diverge from Goldman’s, so he should consider hiring his own counsel.

“As a practitioner, I mentioned to him that I felt the risk in the long run was that the lawyer who was acting for him might end up in a near conflict-of-interest situation,” Mr. Follie, whose daughter is friends with Mr. Tourre, said in an interview last December.

After the S.E.C. case was filed in summer 2010, Mr. Follie wondered how Mr. Tourre had wound up as the only defendant. “I felt that somewhere down the line, he must have done or not done the proper things to get out of this. I was personally wondering if he had sufficient representation disassociated from Goldman,” he said.

I don’t want to impute any wrongdoing to anyone here and, indeed, journalists often aren’t privy to key facts. But it certainly seems that either Tourre is a complete moron or he’s been told (perhaps in an unspoken way) that he needs to toe the company line and stick with their lawyers. The fact that Tourre is the only named defendant despite the many more senior parties involved here (many of whom the article names) suggests to my conspiracy-minded side that whatever lawyers he has are not pressing the SEC enough to bring in the other potentially-culpable individuals. Other than what I’m reading into the story here, though, there’s no evidence or allegation of that.

P.S. – Bar review sucks. TTFN.