April 4, 2013

Trader's fraud cost $118 million

The former Goldman Sachs employee admits risking $8 billion to boost his earnings, then lying to cover it up.

The Associated Press

NEW YORK - A former Goldman Sachs trader pleaded guilty to wire fraud Wednesday, admitting that he caused his company to lose $118 million in 2007 when he put $8 billion at risk.

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Former Goldman Sachs trader Matthew Taylor leaves court in Manhattan after pleading guilty to wire fraud. He’ll be sentenced July 19.

The Associated Press

Matthew Marshall Taylor, 34, said he took the position on a futures contract traded electronically through the Chicago Mercantile Exchange in December 2007 to enhance his reputation and boost his earnings in a year when he made $150,000 in salary and $1.6 million in bonuses. At the time, he was working at Goldman Sachs in lower Manhattan.

According to court papers filed in Manhattan, Taylor entered fictitious information in trading account records and lied to company representatives to cover up the fact that he had put 10 times more money at risk in the trade than he was allowed. He claimed that the $8 billion at risk was actually only $65 million, the papers said.

U.S. District Judge William H. Pauley III said he was miffed that in a plea deal, the government was holding Taylor responsible for no more than $2.5 million in losses. The amount of money lost in financial crimes usually plays a significant role in the length of any prison sentence.

The judge also said he could not understand why the government was not making a legal finding that Taylor had used "sophisticated means" to carry out the crime. Such a designation would again likely increase the length of any prison sentence.

A prosecutor said he did not believe the enhancement was appropriate because Taylor carried out the fraud in a manner similar to his usual work patterns, and the company's financial stability was not threatened.

"The court's puzzled by the lack of any enhancements in this case with the loss of $118 million," Pauley said. "He created fictitious interactions and then lied about them for a period of time. I don't understand how that doesn't involve the use of sophisticated means."

Pauley added: "He cooked the books and that's not sophisticated?"

Taylor was freed on $750,000 bond. He could face up to 20 years in prison at a July 19 sentencing.


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