Perp walk for Matthew Taylor on Wednesday.
Former Goldman trader Matthew Taylor exits federal court in New York on April 3, 2013.
How is this materially different from Goldman Sachs hiding from clients the fact that the CDO they just bought was custom-built by hedge fund manager John Paulson, designed to fail -- stuffed with the worst of subprime mortgage dreck on purpose -- and that both Goldman and Paulson would be taking a secret short position on the CDO.
Here's your answer: there is no difference.
But Goldman won big with Paulson, only the client got hurt, so no one went to jail.
In this case, Goldman lost $118 million.
So you can bet your ass that trader is going to prison.
By far the best part of the story is Taylor's admission that he created the secret position in order to boost his bonus. For the first time in a while, bonus-driven fraud hurts a Wall Street bank more than it hurts taxpayers. And for a final laugh, Morgan Stanley hired Taylor in March 2008, three months after Goldman Sachs fired him.
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Ex-Goldman Trader Faces Prison For Hiding $8 Billion Position
Bloomberg
Matthew Taylor, a former Goldman Sachs trader, pleaded guilty to concealing an unauthorized $8.3 billion trading position in 2007, causing the bank to lose $118 million.
Under an agreement with the government, Taylor, 34, pleaded guilty to a single count of wire fraud yesterday before U.S. District Judge William H. Pauley in Manhattan federal court. He told the judge he took the position to boost his standing, and his bonus, at Goldman Sachs.
Reading from a prepared statement, Taylor told Pauley that on Dec. 13, 2007, he accumulated a position 10 times the amount he was allowed to take in futures contracts tied to the Standard & Poor’s 500 Index. He said he made false entries in a manual trading system to hide the position on the CME Globex electronic-trading platform used by Goldman Sachs. He said he lied when questioned about the position by other Goldman Sachs employees.
“I accumulated this trading position and concealed it for the purpose of augmenting my reputation at Goldman and increasing my performance-based compensation,” Taylor said. “I am truly sorry.”
In a one-count charging document, prosecutors said Taylor made the unauthorized trades to compensate for losses in his trading account the previous month. Taylor’s salary in 2007 was $150,000 and he expected a $1.6 million bonus, prosecutors said.
After Taylor ran up the $8.3 billion position, which exceeded the combined limit for his 10-trader desk, he was contacted by a member of the Market Risk Management and Analysis team. He falsely claimed the trading account had a position of $65 million, rather than about $8 billion, according to the government.
The maximum sentence for wire fraud is 20 years in prison. Both sides agreed that federal sentencing guidelines, which aren’t binding, call for Taylor to get 33 to 41 months in prison and pay a fine of $7,500 to $75,000.
Pauley asked why prosecutors didn’t seek a higher guideline range for Taylor for jeopardizing the safety and soundness of a financial institution. “I want to just make it very clear to the defendant and his counsel that the court is puzzled by the lack of any enhancements in this case, with a loss of $118 million,” the judge said.
Morgan Stanley hired Taylor in March 2008, three months after Goldman Sachs fired him.
Continue reading...
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Update - How Matthew Taylor tried to regain his Goldman bonus
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