Jurors in the trial of Raj Rajaratnam, the hedge-fund executive accused of insider dealing, came face to face yesterday with one of Wall St's most powerful bankers, as the Goldman Sachs chief executive, Lloyd Blankfein, took the witness stand.
Blankfein declared that one of the company's former board members, Rajat
Gupta, had violated Goldman's ethics policies by passing details of board discussions to Rajaratnam within hours of meetings.
The court was played wiretapped conversations from 2008 in which Gupta told Rajaratnam that Goldman's board was debating whether to buy a high street bank or an insurance company, to take advantage of plunging share prices at other companies during the credit crisis. On several occasions, prosecutors stopped the tapes to ask Blankfein if he recalled those board talks and whether Gupta was passing on accurate information.
Among a string of share trades through which Rajaratnam's hedge fund, Galleon, is alleged to have netted US$45 million ($60 million) in illegal profits, was the purchase of Goldman shares in September 2008 on the eve of an investment in Goldman by Warren Buffett.
Blankfein explained why the pending investment by Buffett had been expected to boost Goldman's share price. "However shape we were in before, [investors] would think we were in better shape as a result of this," he said.
Buffett is a "very, very shrewd and successful investor", he said, and his investment would be a positive sign at a time of financial crisis.
In October that year Gupta called 23 seconds after a board meeting to reveal details about unexpectedly poor quarterly results the bank was about to publish. Galleon sold all its Goldman shares.
Last month, the US Securities and Exchange Commission launched a so-called "administrative action" against Gupta, but he has not been charged with criminal offences.
Gupta is counter-suing the commission, saying he denies accusations of wrongdoing and has been unfairly denied his right to a jury trial.
- INDEPENDENT
