Mistakes were made, Goldman Sachs Group Inc. admitted when it settled its case with the Securities and Exchange Commission on July 16. But the man who allegedly made them remains at loggerheads with the agency. Fabrice Tourre, aka Fabulous Fab, asserted his innocence in a July 19 answer to the SEC that begged the question of why he and the government didn't settle his case along with that of his employer.

The SEC accused Goldman and Tourre of committing securities fraud by selling a collateralized debt obligation in the winter of 2007 and failing to disclose that a hedge fund managed by John Paulson played a major role in selecting the subprime residential mortgage-backed securities that underlay it. The CDO cratered in value along with the rest of the market later that year. Many observers have theorized that Goldman (and the SEC) is using Tourre as a scapegoat, even though he comes off in the SEC's complaint as a midlevel banker whose primary crime is injudicious use of e-mail rather than a French-speaking financial mastermind. Others believe the SEC hopes to persuade Tourre to accuse his superiors of wrongdoing.

The reality may be less dramatic. All three parties have different goals, and therefore different conditions they would accept in settling. Take the SEC: It treats companies differently than individual wrongdoers. Since shareholders ultimately pay the penalty when a company settles, and since, in the prosecutorial view of the world, individuals rather than companies commit wrongs, the regulator settles with companies in order to deter crime indirectly, by giving companies added incentive to prevent crime by, for example, closely monitoring their employees.

The government thus uses corporate liability to deter individuals. The SEC also combines the threat of corporate liability with the offer of leniency to induce firms to cooperate in helping the agency sanction individuals. The theory is that such a policy enhances the deterrent threat of individual sanctions.

"Settlements with individual wrongdoers are different," says Jennifer Arlen, a professor at New York University School of Law. "If the individual perpetrators of the world know that the SEC has a regular policy of settling and reducing the fine, then you lose deterrence effect."

As for Tourre, Arlen says, he "is the central person who was in charge of that alleged wrong in the SEC's telling. If there was a crime, he is the person whom they really should be bringing charges against. And if they're not, then they're not doing as good a job of deterring this crime. If there was such a crime and they settle, then they should be settling for a pretty significant sanction." Tourre didn't want to accept that sanction. Hence the stalemate.

Tourre couldn't have afforded Goldman's admission that it made a "mistake" by neglecting to mention Paulson's role in choosing the MBS portfolio that the hedge funder planned to short. In exchange for removing the cloud hanging over it, Goldman paid a $550 million fine and assumed some risk of being sued by other buyers of its CDOs. Had Tourre acknowledged such wrongdoing, he would likely have been bankrupted. Often, firms settle SEC claims by paying a fine while neither admitting nor denying wrongdoing, which would have been more palatable for Tourre, but the SEC was able to extract more from Goldman.

Tourre may also be fighting the SEC's attempt to bar him from the securities industry for a number of years. His lawyers at Allen & Overy LLP -- Pamela Chepiga, David Esseks and Brandon O'Neil -- may believe he'll get a better deal by waiting until the media focus on the case has died down. Goldman, on the other hand, just wanted to settle the case and move on.

Much has been made of Tourre's protestations of innocence. Tourre says at the end of his answer to the SEC's complaint that he "reasonably relied on Goldman's institutional process to ensure adequate legal review and disclosure of material information." In other words, he was a functional cog in the Goldman machine.

But that machine may have been defective, or at least not as effective as it should have been. As part of its settlement with the SEC, Goldman agreed to strengthen its processes for vetting CDOs, a concession that its legal and compliance machine were lacking (or that the SEC believes they were).

In their own ways, Goldman and Tourre are both saying that the responsibility for the conduct the SEC is targeting is communal rather than individual. That may not satisfy prosecutors' lust for an individual villain or the SEC's theory that individuals rather than corporations commit wrongs, but it should make sense to anyone who's ever worked in a bureaucracy.