BUSINESS
07/18/2013 12:23 pm ET

The SEC's Trial Of Fabrice Tourre Is Already In Deep Trouble

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As "The Wire" taught us, if you come at the king, you best not miss. As the Securities and Exchange Commission is teaching us, if you come at a minion several levels below the king, you had really best not miss.

It looks like the SEC is well on its way to missing Fabrice "Fabulous Fab" Tourre: Its civil lawsuit against the former mid-level Goldman Sachs banker is already in deep trouble, after only a few days of trial.

On Wednesday, SEC lawyers battled in court with the man who was supposed to be their star witness against Tourre: Paolo Pellegrini, a former executive with the hedge fund Paulson & Co. According to The New York Times, Pellegrini repeatedly contradicted his own past statements, undercutting the government's case that Tourre had misled clients about a toxic collateralized debt obligation he had hand-crafted for failure, with coaching from Paulson, who was betting against it.

I'm no Alan Dershowitz, but something tells me that when a government lawyer and his own star witness have "trouble hiding their contempt for each other," as the NYT describes it, then that is probably pretty OK news for the defense.

Pellegrini's going rogue has been the only interesting thing to happen in a trial that has otherwise actually put jurors to sleep. Again, I am no Jack McCoy, but I would think the plaintiff would prefer jurors to feel a steady sense of rage toward the defendant, rather than drowsiness.

Who knows, maybe the jurors' imaginations will yet be gripped by Tourre's emails discussing his doubts about the CDO, dubbed Abacus 2007-AC1, he built and sold for Goldman. But then those emails alone aren't evidence of fraud. And it may also occur to those jurors to ask why the SEC is bothering with Tourre and nobody else at Goldman Sachs, which paid $550 million in 2010 to settle the case without admitting or denying wrongdoing.

This wouldn't matter as much had the SEC not raised the stakes so high, braying about how the Tourre case was a defining moment in its post-crisis Wall Street crackdown. In fact, the case is well on its way to becoming a defining moment, just not in the way the SEC would like.

Maybe if the SEC had actually gone after some kings, it could at least have humiliated itself for a worthier cause.

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