Fabulous Fab Schools Jury on Difference Between :-) and ;-)

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:D Photo: STAN HONDA/AFP/Getty Images

The SEC's trial against ex-Goldman Sachs mortgage guy Fabrice "Fabulous Fab" Tourre doesn't appear to be going too well. First, there was the small matter of the SEC's star witness, former Paulson & Company trader Paolo Pellegrini, going rogue on the stand. (Pellegrini professed not to know what "CDO" stood for — pretty impressive, considering that he used to trade them for a living.) Then, there's the comatose jury, lulled into a daze by a parade of financial jargon, as lawyers tried to explain how, exactly, FabFab misled participants in the Abacus deal about the fact that Paulson had helped construct Abacus, then bet against it.

But the jury perked up yesterday, as FabFab took the stand to explain away his now-infamous e-mails — the ones he wrote to his girlfriends, about how hilarious it was that all these "widows and orphans" were lining up to buy terrible mortgage-backed securities, and how these "monstrosities" were going to collapse any minute. While explaining one e-mail, FabFab was also asked to clarify the meaning behind, and symbolic importance of, the winky-face emoticon.

Bloomberg has the thrilling exchange, surely one of the greatest in legal history:

After Tourre read the full e-mail and translated the French passages for jurors, Martens asked him if he’d left out something.
“A smiley face,” Tourre said.
“Is that a smiley face or a wink?” Martens asked.
“I guess it’s a wink,” Tourre replied.
“After you say there’s an ethical reason for your job, you include a wink, is that correct?” Martens asked.
“Yes,” Tourre said.

FabFab also explained that he was one of "thousands" of vice-presidents at Goldman, just a lowly worker bee, and that he was not, in fact, a sleazy bond salesman who was privately chuckling about the impending collapse of the housing market while peddling mortgage-backed securities to unsuspecting marks, but rather a mere romantic troubadour.

A day after he sent an e-mail about a “surreal” meeting with executives from Paulson and ACA Management LLC on Feb. 2, 2007, Tourre sent [then-girlfriend Marine] Serre a parody he wrote of a popular French song, “La Boheme,” made famous by singer Charles Aznavour. Translated into English, Tourre’s version ends: “And when a few clients/Took a credit-linked note/In exchange for a good fresh P&L/We narrated verses/Gathered around the stove/Forgetting about the crisis.”

Tourre called the e-mail "a silly late-night poem I was writing to my girlfriend, adapting a French song."

So now, the SEC has proven beyond a shadow of a doubt that FabFab is a cheesy, bilingual romantic who writes dumb e-mails from his work computer. Now, all it has to do is convince the jury that he materially misrepresented the construction of a collateralized default obligation in violation of Rule 10b-5. Easy-peasy! Although, honestly, in a proper justice system, using the winky emoticon would be a crime all its own.