I think the SEC could lose its case

Paolo Pellegrini, a former top executive at hedge-fund Paulson & Co., told investigators at the Securities and Exchange Commission that he had informed ACA Management LLC that his firm was betting against the transaction at the center of a lawsuit the SEC brought against Goldman Sachs Group Inc., according to a person familiar with the matter.

The testimony, in late 2008, could undermine the government's case against Goldman, which is accused of misleading ACA, the deal manager, about Paulson's bearish position on the deal. Mr. Pellegrini and the Paulson team worked with both Goldman Sachs and ACA to structure the deal.