Behind The Scenes: Did A Goldmanite Lose Their Job Over The SEC Investigation? And Just How/Why Did Goldman Purchase C-BASS For Pennies On The Dollar?

Some terrific investigative reporting by Matt Goldstein at Reuters discloses that while Lloyd Blankfein is aggressively defending Tourre, claiming the Frenchman did nothing wrong despite earlier reports that he was deregistered by the FSA, and the Telegraph now chiming in he has now in fact been barred in a major setback for Goldman's defense, another Goldman employee who was part of the 18-month SEC investigation, mysteriously departed in June of 2009. The person in question: Gail Kreitman, a 1991 Wharton grad, who had previously worked at Merrill (1997-2003) and Lehman (2003-2006) according to her Finra records, before finally landing at Goldman for a three year stint as a "GS&Co. Sales Rep." Gail had been identified previously in the initial Goldman Wells response, and was named as a person whose sworn testimony may have been the catalyst for the SEC's case against Goldman Sachs. Where the plot really thickens is a cursory glance at the bio of her husband, Jeffrey Toll, who according to Bloomberg is a Co-Founder of now-defunct C-BASS (Credit-Based Asset Servicing and Securitization) a company formed with initial funding by mortgage insurers MTIG and Radian. For those unfamiliar, "C-BASS was a leading issuer, servicer, and investor specializing in credit-sensitive residential mortgage assets. These assets included performing subprime and Alt A, nonperforming, reperforming, second lien and small commercial loans, as well as subordinated and mezzanine RMBS with prime, subprime, Alt A and high LTV collateral" and that "It currently is liquidating its existing portfolio and returning the cash proceeds received to its lenders and investors." One wonders just what Ms. Kreitman did to merit the severance of her ties with Goldman, and whether C-BASS was in any way involved, or whether it had any dealings with Goldman's now infamous mortgage group, ala ACA?

Goldstein reports:

Gail Kreitman, the former Goldman bond saleswoman, is not named as a defendant in the Securities and Exchange Commission's lawsuit against Goldman and another of the investment firm's bond salesmen, Fabrice Tourre. Kreitman is not even identified by name in the complaint.

But Kreitman, who left Goldman in June 2009, was interviewed by securities regulators during the course of their 18-month investigation, and some of her email communications are cited by the SEC in the 22-page complaint.

The SEC points to some of Kreitman's emails as part of its claim that Goldman and Tourre misled ACA Capital Management, the outside manager tapped to oversee the transaction, about hedge fund giant Paulson & Co's economic interest in the deal.

Kreitman is not identified by name in the emails cited in the complaint. The SEC refers to her simply as a "GS&Co. sales representative."

But in a lengthy legal filing submitted to the SEC last September, lawyers for Goldman Sachs try to explain away the emails between Kreitman and ACA executive Laura Schwartz. Goldman's attorneys contend that Kreitman did not intend to give ACA officials the impression that the hedge fund was either an equity investor or "long" on the deal.

"The fact that Ms. Kreitman did not correct Ms. Schwartz's statements that Paulson was an equity investor does not indicate that she attempted to conceal the truth from ACA," said lawyers from the New York firm Sullivan & Cromwell, Goldman's outside counsel.

Goldman's outside lawyers in the filing downplayed Kreitman's role in engineering the so-called synthetic collateralized debt obligation called Abacus 2007-AC1. The lawyers said Kreitman was merely an "intermediary" whose main job was to "manage the relationship for ACA."

The Goldman lawyers even suggest Kreitman, who previously worked at Lehman Brothers and Merrill Lynch before coming to Goldman in 2006, may not have "understood the significance of Ms. Schwartz's statements suggesting she believed Paulson to be an equity investor."

What again is most notable about this situation is that Ms. Kreitman, who currently lives in Livingston, NJ (we attempted to reach her listed phone number but got only voicemail) left Goldman in the middle of last year: hardly a time when one departs a company especially without some like replacement - no additional record of her being employed currently is indicated by Bloomberg.

Yet, as pointed out, a glance at her husband's bio via Bloomberg led to some surprises:

Here is some additional color on what precisely Kreitman did at Goldman according to the initial Wells Response:

The record shows that Ms. Kreitman, who provided sales coverage on ACA, acted as an “intermediary between the [various] trading desk[s] and clients.” (Kreitman Tr. 11.). Ms. Kreitman?s role in 2007-AC1 was to “manage the relationship for ACA,” meaning that she “acted as an intermediary between the trading desk and [ACA] facilitating meetings and phone calls.” (Id. at 27-28.) She did not “attend or participate [in the meetings she arranged]” relating to the 2007-AC1 transaction, nor was she “involved in” the creation of the 2007-AC1 CDO. (Id. at 31-33.) Nothing in the record suggests that Ms. Kreitman understood the significance of Ms. Schwartz?s statements suggesting that she believed Paulson to be an equity investor, much less that Ms. Kreitman acted with scienter or departed from the standard of ordinary care by not correcting them.

And just as ACA ended up being allegedly on the wrong side of the Paulson trade, we wonder whether Ms. Kreitman's coverage list also included C-BASS, as well as potentially MTIG and Radian. Was she also responsible for selling structured products or investment ideas to a firm in which her husband was the co-founder? If so, is there any incremental liability involved over and above what happened in terms of Goldman disclosure with ACA, which is as the heart of the SEC case, and in which Ms. Kreitman, it appears, was instrumental in providing information to the SEC, which may or may not have been the key info on which the SEC's entire case rests?

Was Ms. Kreitman fired in retribution for inappropriate disclosure to the SEC? Was she fired in fear of what else could be uncovered should someone dig deeper? Is she now a cooperating witness with the SEC? Is her husband's role at C-BASS being used as leverage, especially if indeed there were any relations between Goldman and the bankrupt firm? Was C-BASS used, knowingly, as a comparable patsy to ACA? Did MTIG and Radian shareholders lose all, if indeed Goldman was selling them securities of the same type as Abacus with the witting knowledge of people on both sides of the transaction? Or did she just leave voluntarily on amicable terms in the middle of the worst year for Wall Street employment in history?

Zero Hedge will continue to pursue these questions over the next few days.

What we do know is that at the end of the day, the remains of C-BASS were sold off to the Archon Group umbrella, owned by... Goldman Sachs.

You do the math.

We also certainly will dig into the other people who provided sworn SEC tetimony: Melanie Herald-Granoff, Michael Nartey, and David Gerst (in addition to Fab Fab of course).