March 28, 2024

DealBook: Former Goldman Trader Pleads Guilty to Wire Fraud

The headquarters of Goldman Sachs in New York.Mark Lennihan/Associated PressThe headquarters of Goldman Sachs in Manhattan.

7:08 p.m. | Updated A former Goldman Sachs trader suspected of fabricating huge positions pleaded guilty to criminal actions on Wednesday, escalating a case that until now had led only to civil charges.

Matthew M. Taylor, whose trading caused unexpected losses for Goldman, pleaded guilty to one count of wire fraud at a court hearing in Lower Manhattan. Mr. Taylor, who more recently worked for Morgan Stanley, admitted to entering fabricated trades that concealed an $8.3 billion position to protect his bonus.

“I am truly sorry,” Mr. Taylor, 34, a Florida resident, told a federal judge on Wednesday. He had surrendered to the F.B.I. earlier Wednesday morning and was released on $750,000 bond.

In a statement, his lawyer noted that Mr. Taylor “has accepted responsibility for his conduct today.” The lawyer, Thomas C. Rotko, called “the unfortunate events” at Goldman “an aberration,” adding that “he looks forward to the opportunity to put this behind him and resume what has otherwise been a productive and exemplary life.”

While the charge could carry as much as a 20-year prison term, Mr. Taylor signed a plea agreement that suggests a lighter punishment, in the range of 33 to 41 months. Still, Judge William H. Pauley III, who questioned on Wednesday whether prosecutors should have adopted a more aggressive stance, has discretion to set the penalty. Mr. Taylor’s sentencing is set for July 26.

The guilty plea came as a surprise development in a case that seemed limited to regulatory actions. Last year, the Commodity Futures Trading Commission accused Mr. Taylor of defrauding Goldman and sanctioned the bank for failing to supervise him. In December, Goldman paid $1.5 million to settle the case.

At the time, Goldman noted that the trades did not affect customer money. “Since these events, we have enhanced our controls,” the bank said, adding that “Taylor admitted his conduct following market close and was subsequently terminated.”

The problem arose in late 2007, as Mr. Taylor was riding out a rough patch in the markets. Mr. Taylor, who traded equity derivatives products in New York, had erased his trading gains for the year. And his bosses, threatening to slash his $1.6 million bonus, ordered him to whittle down the risk on his trading book.

But Mr. Taylor, prosecutors said, ratcheted up the position. Mr. Taylor soon blew through risk limits the bank set not only for him but also for his entire 10-person trading desk.

To conceal the size of the position, he entered “multiple false entries” into a Goldman trading system, booking trades that he never actually made. The bogus trades gave the false impression that his portfolio was well balanced.

Mr. Taylor, authorities said, manually entered his trades so they did not register on the radar screen of the CME Group, the giant commodities exchange. The trading prompted about $120 million in losses for Goldman.

“Taylor has admitted he actively circumvented internal controls at Goldman Sachs for his own benefit, exposing the firm to substantial risk in the process,” said George Venizelos, the F.B.I. assistant director in charge of the New York field office.

Despite the stain on his record, Mr. Taylor was hired by Morgan Stanley in 2008. He has since left the firm.

Article source: http://dealbook.nytimes.com/2013/04/03/former-goldman-trader-surrenders-to-f-b-i/?partner=rss&emc=rss

On Food Safety, a Long List but Little Money

The landmark food safety law passed by Congress last December is supposed to reduce the frequency and severity of food safety problems, but the roll call of recent cases underlines the magnitude of the task.

“It’s an enormous undertaking,” said Mike Taylor, the Food and Drug Administration’s deputy commissioner for foods, whose job it is to turn the far-reaching law into a coherent set of rules that farmers, food processors and importers can follow and regulators can enforce.

The agency is taking on the expanded mission at a time when Washington budget-slashing means that regulators have little hope of getting additional money and may instead have their budgets cut by Congress.

“We have to have the resources to implement this law,” Mr. Taylor said.

“The stark choice is we either find the resources or we forgo implementing this law the way Congress intended. You can’t build something brand-new without the resources to do it.”

The agency is now in the process of writing the food safety rules called for by the law, with the goal of preventing outbreaks like those this summer. (The nation’s meat and poultry supply was already regulated by the Agriculture Department and is unaffected by the new law.)

One of the most complex jobs involves setting standards for farmers to grow and harvest fruits and vegetables safely. The first draft of the farm rules is due early next year. The agency has not said what they will include, but they are expected to deal with basics like hand-washing stations for field workers, tests of irrigation water and measures to protect fields from wild animals that can track in bacteria.

Investigators in Oregon say they believe that deer may have brought E. coli into the strawberry fields there, so such federal rules could potentially help prevent future outbreaks of that kind.

Yet the standards must take into account a huge variety of crops, farming practices and farm sizes.

The task is all the more delicate because the agency has never before had a major presence on American farms.

For a year and a half, well before Congress passed the food safety law, Mr. Taylor has been on a listening tour, visiting farmers around the country and seeking to allay their fears that an army of food safety bureaucrats will come storming through their fields telling them how to do their jobs.

Recently, he visited Long Island, where he tramped through the sandy fields of the 30-acre Deer Run lettuce farm of Bob Nolan in Brookhaven.

Mr. Nolan said he was initially anxious about the new law but was now eager to help the agency make it work for farmers. Mr. Taylor was joined by several agency employees involved in writing the farm rules, and Mr. Nolan told them that he hoped the visit would help them better understand how a farm worked.

He went over steps he had taken to improve food safety, including creating a tracking system that linked every head of lettuce he sold to the section of field where it was grown and doing yearly tests of irrigation water for dangerous bacteria. And he asked for clear guidance in the rules for techniques like how to safely use composted horse manure to fertilize his fields.

The complexity of the F.D.A.’s task became clear as the day went on. At the second stop, a potato farm in Riverhead, the owner Jimmy Zilnicki said that he knew little about what the government expected of him.

“We’re all just trying to find out what this food safety thing is all about,” he said. Besides, he argued, potatoes were a safe crop and he questioned whether it was worth including them in food safety rules.

Mr. Taylor told him that the F.D.A.’s job was to focus most of its efforts where the food safety risks were greatest.

The third stop was a 65-acre organic farm in Riverhead, run by Eve Kaplan-Walbrecht and her husband, Chris. They grow a dizzying array of crops, from arugula to zucchini, most of which they sell directly to customers through farmers’ markets and buying clubs.

They, too, had made costly improvements with an eye toward food safety, including building a large processing shed with a concrete floor, treated water, a bathroom and refrigerated storage. The new law exempts small farms that average less than $500,000 a year in sales and sell mostly to local customers. But Ms. Kaplan-Walbrecht said that her farm, known as Garden of Eve, brings in too much money to qualify for the exemption.

She worried that the new law could become a burden for small farmers, either by adding paperwork or by unleashing regulators with little understanding of how a farm worked.

Article source: http://feeds.nytimes.com/click.phdo?i=954dfc963b3fb8fd1b4f0e79d8b7934b