Updated, 10:03 p.m. | A former Goldman Sachs trader at the center of a toxic mortgage deal lost a closely watched legal battle on Thursday, giving Wall Street’s top regulator its first significant courtroom victory in a case stemming from the financial crisis.
A federal jury found the trader, Fabrice Tourre, liable on six counts of civil securities fraud after a three-week trial in Lower Manhattan. The case had given both sides — the government and Mr. Tourre — a chance to repair their reputations.
For the Securities and Exchange Commission, a regulator dogged by its failure to thwart the crisis, the case offered a shot at redemption following one courtroom disappointment after another, including two similar mortgage-related cases that crumbled last year.
For Mr. Tourre, 34, who abandoned his trading career to pursue a doctorate in economics and become a teacher, the threat of being barred from Wall Street came second to the black mark on his name.
Five years after Wall Street risk-taking nearly toppled the economy, the S.E.C. has taken only a handful of employees to court in connection with the crisis; most cases have been settled. The agency has not leveled fraud charges against one top executive at a big bank.
“He was the one that didn’t get away,” one of the nine jurors, Beverly Rhett, said after the verdict. “The decision-making was a slow and arduous process,” said Ms. Rhett, a retired teacher who was juror No. 2. “We went over each item with a fine-tooth comb. We looked into the semantics and tried to understand them as best as we could.”
“We never felt there was anything that was cut and dry,” she added.
The S.E.C. threw innumerable resources at Mr. Tourre’s case, underscoring its importance to the agency. The onslaught began when the S.E.C. opened an investigation into Goldman after the 2008 crisis.
Lorin Reisner, then the No. 2 enforcement official at the agency, conducted all the pretrial depositions, a task typically assigned to lower-level investigators. When it came time for trial, the S.E.C. assigned Matthew T. Martens to lead the case, although he typically oversees the agency’s trial lawyers without acting as one.
“There is no denying the importance of this to the S.E.C. because it is a financial crisis case,” said Stephen J. Crimmins, a partner at the law firm K&L Gates and former deputy chief litigation counsel in the S.E.C. enforcement division, who was not involved in this case.
Yet even with the triumph over Mr. Tourre, the S.E.C. could still face scrutiny.
Some critics have questioned why the agency chose to make Mr. Tourre — a midlevel employee who was stationed in the bowels of Goldman’s mortgage machine — the face of the crisis. Rather than aim at a high-flying executive, the agency pursued someone barely known on Wall Street.
Those concerns also arose in another S.E.C. crisis-era case, in which a jury cleared a midlevel Citigroup employee, questioning why the agency had declined to charge more senior executives. Even Ms. Rhett, the juror, after reflecting on Mr. Tourre’s case, said, “I could characterize him as somewhat of a scapegoat.”
“There are bigger fish out there swimming fat and free, and they made a lot more money from the mess than Tourre ever dreamed of making,” said Erik Gordon, a professor of law and of business at the University of Michigan.
For its part, the S.E.C. notes that it has won about 80 percent of its trials under Mr. Martens and has sued 66 chief executives and other senior officers in cases related to the financial crisis. S.E.C. officials also note that the agency files cases only where they can be proved, even if that means not pursuing top executives insulated from the bad acts of their employees.
Andrew Ceresney, co-director of the S.E.C.’s division of enforcement, said in a statement: “We are gratified by the jury’s verdict finding Mr. Tourre liable for fraud. We will continue to vigorously seek to hold accountable, and bring to trial when necessary, those who commit fraud on Wall Street.”
It is unclear whether Mr. Tourre will appeal the verdict. A spokesman for Mr. Tourre declined to comment.
But a friend who dined with Mr. Tourre this week at Walker’s Restaurant, a pub near the courthouse, said he appeared upbeat while discussing his doctoral program at the University of Chicago. “He doesn’t really care and finds the entire thing politically motivated,” the friend, who spoke on the condition of anonymity, said about the S.E.C.’s case.
After two days of deliberation, the nine-person jury concluded that Mr. Tourre had misled investors about the mortgage deal at the heart of the case. Of the seven charges against Mr. Tourre, the jury found him liable on six. He was found not liable of perhaps the most specific fraud charge, which contended he had knowingly made an untrue or misleading statement.
Juror No. 9, Leonel Lopez, 27, who works in advertising, said, “I found Mr. Tourre’s testimony to be genuine and the defense’s case solid, but the evidence suggested that a number of S.E.C. violations had occurred.”
As the verdict was read on Thursday, Mr. Tourre sat emotionless, briefly glancing at the jury before fixing his stare elsewhere. When the jury shuffled from the courtroom, few made eye contact with him. Minutes later, he departed the building, carrying a copy of “The History of the Decline and Fall of the Roman Empire” by Edward Gibbon.
Judge Katherine B. Forrest has the final say on the penalty Mr. Tourre must pay, be it forfeiture of profits or a fine. The fine could range from $5,000 to $130,000 for each violation.
Mr. Tourre could also be barred from the securities industry, but that decision lies solely with the S.E.C.
The S.E.C.’s victory reopens some wounds for Goldman, which is paying for Mr. Tourre’s defense. Inside the bank, employees had been quietly cheering for Mr. Tourre, whom one executive called “the poor kid.” Viewing the S.E.C.’s case as thin, the executives saw Mr. Tourre as a proxy for the fight they wanted to wage with regulators.
Goldman settled with the S.E.C. in 2010, paying what was at the time a record $550 million fine. The bank conceded that it had made a “mistake.”
On Thursday, a spokesman for Goldman Sachs said, “As a firm, we remain focused on being more transparent, more accountable and more responsive to the needs of our clients.”
The verdict comes three years after the S.E.C. thrust Mr. Tourre into the spotlight with civil charges and a series of embarrassing e-mails. Those e-mails, in which Mr. Tourre referred to a friend’s nicknaming him the “Fabulous Fab,” a moniker that has come to define Mr. Tourre’s persona, transformed him from an obscure trader into a symbol of Wall Street hubris.
The S.E.C.’s case against Mr. Tourre hinged on the contention that he and Goldman sold investors a mortgage security in 2007 without disclosing a crucial conflict of interest: a hedge fund that helped construct the deal, Paulson & Company, also bet that it would fail. In his opening argument to the jury, Mr. Martens, the S.E.C.’s lead lawyer, depicted the commission’s case as an assault on “Wall Street greed,” arguing that Mr. Tourre created a deal “to maximize the potential it would fail.”
Mr. Tourre was living in a “Goldman Sachs land of make-believe” where deceiving investors is not fraudulent, Mr. Martens declared on Tuesday.
Throughout the trial, Mr. Martens invoked documents that Goldman had submitted to investors — including a term sheet and a 66-page marketing book — in which the bank said that the deal was “selected by ACA,” an independent company, without reference to Paulson & Company. Mr. Martens also cited an e-mail in which Mr. Tourre stated that the riskiest slice of the mortgage trade — a piece typically bought by someone betting that the deal would succeed — was “precommitted,” when in fact it was not even going to be offered.
The S.E.C. also used some of Mr. Tourre’s love notes to a girlfriend who worked at Goldman to impugn his credibility. In one e-mail, he joked about selling toxic real estate bonds to “widows and orphans.”
On the witness stand, Mr. Tourre acknowledged that the e-mail had been “in poor taste.”
But he was confident that he did nothing wrong. “I am here to tell the truth and clear my name,” Mr. Tourre, whose fresh face and diminutive stature suggest he is much younger than his age of 34.
His lawyers portrayed him as a scapegoat who was 28 at the time of the crisis. The lawyers also noted that senior Goldman executives had approved the deal.
“The idea that Fabrice Tourre, a 28-year-old vice president, was conjuring up a $1 billion fraud, or conspiring with others, is just not supported by the evidence,” Sean Coffey, one of his lawyers, said during his closing arguments.
Mr. Tourre’s lawyers have argued that what Paulson & Company was doing should not have mattered to investors. The trade in question had to have an investor who was betting it would fail, and another betting it would rise — a fact each side knew.
The verdict calls into question the decision by Mr. Tourre’s lawyers not to call a single witness, a show of confidence that failed to impress a jury that also included a minister, a graphic designer and a former stockbroker. Some jurors appeared to nod off as the case became bogged down in financial minutiae.
On Thursday, as they emerged from the courthouse, several jurors appeared troubled. “It was intense,” one said. “Exhausting,” said another.
The mood was upbeat at a Starbucks down the street, where the S.E.C.’s legal team took shelter from the rain after the trial. They stood in a group near the doorway, tapping on their smartphones as they arranged train tickets home to Washington.
Mr. Tourre returned to the same place he had started each day: a cramped conference room in an apartment building next to the courthouse. Mr. Tourre, said one person in the room, was the only one there who was upbeat.
The war room, as his lawyers called it, was typically full of tinfoil containers from nearby fast food restaurants. A white board listed names of witnesses. Mr. Tourre often camped out in a smaller room littered with empty Diet Coke cans.
“It’s home right now,” he said recently, shrugging his shoulders.
William Alden, Michael J. de la Merced and Alexandra Stevenson contributed reporting.
This post has been revised to reflect the following correction:
Correction: August 2, 2013
A earlier version of this article misspelled the surname of a retired teacher who was juror No. 2 in some instances. She is Beverly Rhett, not Rhetts.