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The Goldman Sachs banker at the center of fraud allegations against the company, Fabrice Tourre, will testify and defend his actions at a Senate hearing next week, US news reports say.

Tourre, who was accused by the Securities and Exchange Commission of misleading investors in a massive subprime mortgage package that failed, will appear along with chief executive Lloyd Blankfein before the Senate Permanent Subcommittee on Investigations on Tuesday, according to the news reports.

Tourre will tell the panel he did nothing wrong, one of the sources close to the banker said.

Tourre, the only individual named in the SEC case, was “principally responsible” for creating and marketing the failed investment.

Goldman Sachs, which is contesting the claims, has said it “will take all necessary steps to defend the firm.”

Both Tourre and Blankfein have agreed to speak publicly because they wanted to show that Goldman Sachs had nothing to hide, sources quoted in the reports said.

Meanwhile, there are new signs the SEC may have a tough time proving its case.

CNBC reported on Thursday that Paolo Pellegrini, a former top executive at Paulson & Company, has told SEC investigators that he had informed a major investor in the subprime package that his company was betting against the transaction. Paulson is said to have selected the underlying securities in the bundles sold by Goldman and then bet against them, netting some $15 billion.

Christopher Whalen, the managing director of Institutional Risk Analytics, said on Thursday, “There’s no place to hide, so if I were advising Blankfein I would tell him to get out there and tell the story. Securities fraud claims are difficult to prove, especially a civil claim, so I think Goldman has about an even chance of winning in court.’’

Initially, the hearing was to examine the role of Wall Street banks in the creation and sale of mortgage investments and derivatives. But Goldman’s new legal troubles concerning one of those deals has narrowed the committee’s focus.

In calls to important clients, Blankfein has attacked the fraud charges against his investment bank as politically motivated, the Financial Times reported on Thursday. “He feels that the government is out to kill them, that they are under attack and the whole thing is totally political,” one person who received a call told the business daily, adding that he said the action “hurts America.”

US President Barack Obama denied “categorically” that the White House had prior knowledge of the charges, which came at a pivotal point in his drive to pass reforms of risky business practices in the US finance industry. 

NYT, AFP, JG