The testimony of a former Paulson & Co official could undercut the Securities and Exchange Commission's fraud case against Goldman Sachs, CNBC has learned.
The former Paulson lieutenant, Paolo Pellegrini, testified that he told ACA Management, the main investor in a Goldman mortgage-securities transaction, that Paulson intended to bet against—or short—the portfolio of mortgages ACA was assembling.
If true, the testimony would contradict the SEC's claim that ACA did not know Paulson was hoping the mortgage securities would fail and weaken charges that Goldman misled investors by not informing ACA of Paulson's position.
The SEC also claims Goldman told ACA that Paulson would take an equity stake in the collateralized-debt-obligation deal, apparently to bolster the value of the underlying securities. However, CNBC has examined documents showing that Pellegrini testified that there was no equity stake to be had in the deal.
According to documents, a government official asked Pellegrini whether he informed ACA manager Laura Schwartz about Paulson's position in the portfolio, named Abacus 2007-AC1.
Pellegrini said there were at least three meetings with Schwartz and that he told her during at least one of them either what type of securities Paulson wanted in the portfolio or that the hedge fund intended to short them.Page 1 of 2 | Next Page