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In December, the Securities and Exchange Commission asked U.S. District Judge Katherine B. Forrest to impose financial penalties of more than a million dollars on Fabrice Tourre, the former Goldman Sachs Group trader who, last August, was found liable for misleading investors in an infamous 2007 deal known as Abacus. On Tuesday, Tourre’s lawyers filed a reply brief, asking Forrest to impose a maximum penalty of sixty-five thousand dollars. The brief also noted that, “after receiving his doctorate, Mr. Tourre plans to pursue a career in academia.”
Tourre is pursuing a Ph.D. in economics at the University of Chicago. Observing him in court last August, I couldn’t help wondering what my reaction would be if he were a candidate for a teaching job at the university where I teach. His experience at Goldman Sachs and a Ph.D.
The Tourre I witnessed in court was a sincere and polite young man, albeit one who had allegedly violated securities laws. I was sympathetic to the fact that he was poorly trained and supervised, and that others shared responsibility for the Abacus fraud; I was also struck by the fact that, even six years later, he seemed, in many ways, naïve—in over his head at Goldman Sachs, and perhaps even unaware that he had helped mislead investors. Accepting blame and showing remorse may not have been appropriate when Tourre was defending himself in court. But, now that he has been found liable for securities fraud, Tourre would do well to take responsibility and apologize for his actions if he wants to maximize his chances of a successful academic career. The brief filed by his lawyers on Tuesday offered no indication that Tourre acknowledged or felt remorse for the violations for which the jury found him liable; he continues to maintain his innocence, perhaps in anticipation of filing an appeal.
Tourre seems to possess the intellect, at least, to be a successful academic. Even in the Chicago program he has stood out. Professor Nancy L. Stokey told the Times, “He was one of my best students.” Another professor, Robert Shimer said, “He’s someone who, if he continues on the same track, is going to be one of our top job market candidates.”
Despite his impressive credentials, Tourre will have a challenging time explaining his past in job interviews. “The shadow of Abacus will follow him forever,” Tom Donaldson, a professor at the University of Pennsylvania’s Wharton School of Business, told me. “I’d advise him to say, ‘I failed as a banker. I’m working hard to become a fabulous professor.’ ”
Some schools would not hire Tourre because of his record. Patricia Werhane, a professor at the University of Virginia’s Darden School of Business, put it bluntly: “We would not hire him at Darden. But I might bring him to speak.” (Business schools often bring in convicted felons and disgraced executives in an effort to scare students straight and warn them about ethical and legal pitfalls.)
Yet it is possible that Tourre could turn his experience into a positive asset. Christine Bader worked as a corporate social-responsibility specialist at BP during a period when the company faced a string of accidents and its C.E.O. was forced to resign after admitting he had been untruthful about a relationship. She now teaches a course on human rights at Columbia University. (Unlike Tourre, who the S.E.C. says “took the lead” in the Abacus deal, Bader bore no responsibility for BP’s wrongdoing.) “I wondered whether considering myself an expert in corporate responsibility based on nine years with BP was ludicrous,” Bader said. “But I realized that being at a company where things have gone horribly wrong is actually much more useful than only having experienced smooth sailing—if you engage in some serious retrospection and reflection.” There’s also a more straightforward asset Tourre can offer his students: “He’s very skilled in pricing highly complex products, which are still very important for the future of finance,” Hervé Alexandre, a finance professor at Université Paris-Dauphine, pointed out.
Tourre may not be interested in a business-school career after getting his doctorate. He may prefer to retreat into pure economic theory; perhaps his options would be less constrained in an economics department than in a business school. If, however, he wants to help fix the problems he helped cause, then he will need to follow an introspective path. He will need to come to terms to what happened to him at Goldman Sachs. He would do well to jettison any lingering loyalty to the place and come to appreciate how poorly he was trained there, and how ineptly he was supervised. Admittedly, this will be hard to do while Goldman Sachs is paying his legal bills. At some point, though, he needs to sever his ties with the people and the institution that led him to ruin, and acknowledge his own role in a fraudulent deal that became an icon of Wall Street greed.
Michael A. Santoro is a professor at Rutgers Business School and the co-author of “Wall Street Values: Business Ethics and the Global Financial Crisis” (Cambridge University Press, 2013).
Thursday - August 25, 2016