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Rogue trader gets prison, ordered to repay Goldman US$118 million

NEW YORK--Former Goldman Sachs Group Inc. trader Matthew Taylor was sentenced Friday to serve nine months in prison and pay US$118 million in restitution to his former employer after he pleaded guilty to pursuing an unauthorized US$8.3 billion futures trade in 2007.

In imposing a sentence well below the 33- to 41-month term the U.S. Department of Justice had recommended, U.S. District Judge William Pauley in New York castigated both Goldman and government authorities for failing to immediately address Taylor's conduct when it occurred.

The case is a “paradigm of everything that is wrong with Wall Street and the regulators charged with protecting the public,” Pauley said.

Prosecutors claimed Taylor lied to supervisors and fabricated trades in December 2007 to conceal an US$8.3 billion position in Standard & Poor's 500 e-mini futures contracts, which bet on the direction of that index. Goldman fired him shortly thereafter.

The bank had sought the US$118 million to cover its losses on the trade, a request the U.S. Department of Justice supported, though it is unlikely that Goldman will collect.

Taylor, a married father of two, has moved to Florida, where he and his wife have started a pool cleaning business.

“We've tried to rebuild our lives far from Wall Street,” Taylor, who turns 35 on Jan. 1, told Pauley. He pleaded guilty in April, a day after turning himself in to authorities.

He was previously fined US$500,000 by the U.S. Commodity Futures Trading Commission.

Goldman itself paid a US$1.5 million civil fine last December to settle CFTC charges that it failed to adequately supervise Taylor, an amount that Pauley said it earned back in a “couple of minutes” given its more than US$7 billion in annual profits.

Judge Castigates Goldman, Government

Pauley also faulted Goldman for simply firing Taylor without disclosing the full extent of his cover-up.

“Astonishingly, Goldman then watched as one of its competitors, Morgan Stanley, rehired Taylor,” Pauley said.

But the judge saved some of his harshest words for the government, criticizing regulators and prosecutors for failing to investigate Taylor for years and then claiming credit in the media when they finally did.

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