Rogue trader should pay $118 mln to Goldman Sachs -U.S.

Reuters

By Jonathan Stempel

NEW YORK, Dec 3 (Reuters) - A former Goldman Sachs Group Inc trader who pleaded guilty to fraudulently building anunauthorized $8.3 billion futures trade should repay $118million to his former employer to cover its losses and spendabout three years in prison, federal prosecutors said.

In a Monday night filing in the U.S. District Court inManhattan, prosecutors said Matthew Taylor deserves a 33- to41-month prison term that reflects his "blatant abuse" of thetrust placed in him by Goldman, which once considered him a"rising star," and to deter other "rogue traders."

Investigators said the Massachusetts Institute of Technologygraduate fabricated trades and lied to supervisors to conceal an$8.3 billion bet on Standard & Poor's 500 e-mini futurescontracts, which bet on the direction of that index, over atwo-day period in December 2007.

"The defendant took these steps out of both greed andhubris, to improve the bottom line of his bank account and torehabilitate his suffering professional reputation," U.S.Attorney Preet Bharara said in the filing.

Prosecutors said Goldman discovered the scheme on Dec. 14,2007, and spent about $118 million to unwind the position.

Although the defendant's plea agreement estimated a loss of$1 million to $2.5 million, prosecutors said restitution couldbe greater, and that Goldman deserves to have its request torecover all it lost fulfilled.

"Here, Goldman Sachs is a victim," Bharara said. "Orderingrestitution to Goldman Sachs for the cost of unwinding thedefendant's position would make Goldman Sachs whole."

In a Nov. 22 court filing, lawyers for Taylor said themarried father of two, who turns 35 on New Year's Day and has noprior criminal record, should spend no time in prison.

They said Taylor's conduct was the "plainly aberrant" act ofa then 28-year-old trader under "overwhelming" pressure atGoldman to succeed, and that the risk of his committing similarconduct again is nonexistent.

"However misguided, his intentions were never to harmGoldman," Thomas Rotko, a partner at Clayman & Rosenberg, wrote,referring to Taylor. "He makes no excuses for his conduct andaccepts full responsibility for his actions."

Taylor's capacity to make restitution to Goldman was notimmediately clear. He was previously civilly fined $500,000 bythe U.S. Commodity Futures Trading Commission over his trading.Goldman paid a $1.5 million civil fine last December to settleCFTC charges that it failed to appropriately supervise Taylor.

Rotko declined to comment on the government filing.Bharara's office did not immediately respond to a request forcomment. A Goldman spokesman had no immediate comment.

The $8.3 billion position was double the size of a $4.1billion trade that the U.S. Securities and Exchange Commissionhighlighted in a report on the May 6, 2010 "flash crash," wheree-mini trades caused the Dow Jones industrial average toplunge 700 points in just a few minutes.

The case is U.S. v. Taylor, U.S. District Court, SouthernDistrict of New York, No. 13-cr-00251.

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