Why in the world do smart people write so many dumb emails? It seems like I ask myself that question about every other week these days. Incriminating emails have helped bring down several high-profile companies and people, including Enron, Arthur Andersen, and climate researchers from the University of East Anglia, to name just a few.

I think we can safely add Goldman Sachs & Co. to that list. I've been reading that there's a broad effort afoot to "criminalize Wall Street." I thought the SEC's Goldman complaint would be an interesting place to see for myself. I wasn't terribly surprised to find that the SEC's complaint against Goldman was pretty solid as far as the allegations go. I'm curious how Goldman's attorneys will fight back. (If you are interested in the substance of the SEC's complaint, you'll find a link to it below.) What caught my attention right away was how much the SEC based its complaint on the emails of Goldman's young vice president Fabrice "Fabulous Fab" Tourre.

Mr. Tourre was allegedly at the center of a doomed investment product offered by Goldman (basically, a portfolio of subprime mortgages that was supposed to earn investors money as the borrowers re-paid their mortgages. When most of the borrowers defaulted on their mortgages, the investors lost $1 billion, according to the SEC). In this email to a friend, Mr. Tourre leaves little doubt about what he really thought about the investments he was creating for Goldman:

"More and more leverage in the system, The whole building is about to collapse now. . . Only potential survivor, the fabulous Fab . . . standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruousities!!!"

Somehow, I doubt Fabulous Fab is going to survive this one.

I've handled a number of cases over the years where imprudent emails turned up in discovery and changed the outcome of the litigation. Sometimes, the emails are embarrassing to the author, but not directly relevant to the case. This category might include impolite observations about co-workers and business partners, distasteful jokes, and other banter that should probably not have ever been written. I recall encountering one emailer, years ago, who wrote at length about . . . dead puppies (and his tone wasn't sad). Yeah, disturbing. For some reason, his lawyer all of the sudden lost a lot of interest in the case.

Other times, the emails can be directly damaging to the case itself. I once put together a fraud claim exclusively using the defendant's own email trails. To one group, the owner of a business was denying that he was planning a merger with a rival. About one hour later, the same business owner sent emails to rival company to finalize the details of the merger.

Fabulous Fab probably managed to embarrass himself and damage his employer's legal position in one email. Be careful out there. Develop a good email policy and stick to it. You never know when emails will re-appear out of cyberspace to change the direction of litigation. I'll share more thoughts on the perils of email later.



www.sec.gov/litigation/complaints/2010/comp21489.pdf

The SFPS Blog is dedicated to the entertaining discussion of legal issues and trends that affect the business community. To keep things interesting, I'll try to avoid legal jargon and hyper-technical issues. If you need dry, boring legal writing to help you fall asleep at night, I highly recommend Law Review articles, any random portion of the Code of Federal Regulations, State and Federal statutes, and most court filings.

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