NEW YORK (Reuters) - Former Goldman Sachs Group Inc trader Matthew Taylor was sentenced Friday to serve nine months in prison and pay $118 million in restitution to his former employer after he pleaded guilty to pursuing an unauthorized $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 $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 $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 January 1, told Pauley. He pleaded guilty in April, a day after turning himself in to authorities.
He was previously fined $500,000 by the U.S. Commodity Futures Trading Commission.
Goldman itself paid a $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 $7 billion in annual profits.
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.
“It cannot be called justice or oversight when it took the government six years to bring a rogue trader to justice, when the trader admitted his conduct on Day 1,” he said. “At some point, the justice needs to be swift if it’s going to mean anything, other than another press release and the ability to say, ‘another pelt.’”
The office of Manhattan U.S. Attorney Preet Bharara and the CFTC declined to comment on Pauley’s remarks. But a person familiar with the criminal investigation said prosecutors only first became aware of Taylor’s conduct last November after seeing a news report about the CFTC probe.
In a statement, a Goldman spokesman said the bank had disclosed in a filing with the Financial Industry Regulatory Authority that Taylor was fired in 2007 for “inappropriately large proprietary futures positions in a firm trading account”.
Pauley said Taylor is a “brilliant and talented” man who made a series of terrible decisions, and while he did not deserve years in prison, the judge concluded that a short sentence of imprisonment was necessary.
“Everything about this case is sad,” Pauley said. “Your employer’s response was sad. Your conduct is sad. The government’s conduct is sad.
“Undoubtedly, they’ll issue another press release,” he added. As of 5 p.m., Bharara’s office had not yet fulfilled that prediction.
The case is U.S. v. Taylor, U.S. District Court, Southern District of New York, No. 13-cr-00251.
Reporting by Joseph Ax; Editing by Kenneth Barry, Richard Chang and Ken Wills