Rajat Gupta, Former Goldman Sachs Director, Hears CEO's Testimony At Insider Trading Trial

Goldman Sachs CEO Downright Jovial at Ex-Director's Insider Trading Trial

At the insider trading trial of former Goldman Sachs Director Rajat K. Gupta Monday, Goldman CEO Lloyd Blankfein offered testimony supporting key parts of the prosecution's case.

Gupta, who previously headed consulting firm McKinsey & Company, is accused of passing non-public information about Goldman on to jailed Galleon Management Founder Raj Rajaratnam, who allegedly used it in trading. Gupta is charged with conspiracy and securities fraud. If convicted, he faces up to 25 years in prison.

On Monday, Blankfein confirmed Gupta's presence on a conference call the afternoon of Sept. 23, 2008, during which the Goldman Sachs Board of Directors debated whether to accept $5 billion from investor Warren Buffett at the onset of the financial crisis. Prosecutors allege that shortly after that call, Gupta phoned Rajaratnam to pass along information about the deal.

Rajaratnam immediately using that information to buy shares in Goldman, according to prosecutors -- a charge corroborated by Rajaratnam’s former assistant during separate testimony at the Gupta trial in May. Goldman didn’t announce that it was accepting the investment until after markets closed later that day.

Blankfein also testified that during a June 2008 meeting in St. Petersburg, Russia, the Goldman board discussed the possibility of purchasing either a distressed commercial bank or the insurance giant AIG -- information that Gupta was heard relaying to Rajaratnam on a wiretapped phone conversation later that summer. That tape was presented to jurors earlier in the trial.

“It was agreed that AIG would be a suitable target” at the St. Petersburg meeting, Blankfein told the jury Monday.

Any such information discussed in board meetings was secret, Blankfein said. “All parts of it were confidential. The fact that anything was discussed in the board meeting is itself a confidential fact.”

Gupta’s lawyers argued at the opening of the trial in late May that none of the evidence the prosecution is presenting conclusively links Gupta to a crime. "They're presenting a case based on speculation," Gupta’s lead attorney, Gary Naftalis, told jurors during his opening remarks.

This isn’t the first time Blankfein has testified in a case related to Galleon. In March 2011, he was a witness in the trial of Rajaratnam, who was sentenced last October to 11 years in federal prison for insider trading-related crimes.

During his testimony, Blankfein seemed at ease in the downtown Manhattan federal courtroom. Between questions from the prosecution, he leaned back in his chair and played with his tie, grinning widely for reasons not apparent to the audience.

He also laughed heartily as U.S. District Judge Jed Rakoff gently bantered with him during various exchanges.

“I know counsel wants to hide this fact, but we should probably bring out that [Blankfein] was a lawyer” before going into the banking world, Rakoff said. When Blankfein acknowledged that he had worked as a tax attorney at Donovan, Leisure, Newton & Irvine, Rakoff chided that Blankfein then “got religion” and left the legal world for Goldman Sachs in the early 1980s. There was uproarious laughter in the courtroom, which Blankfein joined with a hearty guffaw.

Blankfein’s demeanor was so relaxed that a reporter remarked on it outside the courtroom at the end of the day’s proceedings -- to which Blankfein responded, “I’m always comfortable, but I hope I don’t get too good at [this].”

Asked after the trial whether Blankfein was comfortable with Goldman's board now, Blankfein responded that he is. "I admire... my board," he said.

The Goldman chief’s often jovial posture contrasted sharply with a grim looking Gupta. At one point, Gupta briefly gripped the hand of his wife, who sat just behind him in the gallery. Whether Gupta will testify at his own trial is an open question the defense has yet to answer.

Blankfein is scheduled to continue testifying Wednesday. At the end of deliberations, Rakoff discussed scheduling with Blankfein, whose daughter will graduate from high school Wednesday.

Blankfein asked whether the court could allow him to attend both the morning ceremony and a luncheon immediately following at a restaurant in Yonkers, where Rakoff said he lives.

“I’m going to a restaurant in Yonkers which you probably know,” Blankfein said to the judge.

Rakoff responded, “If it’s the one I’m thinking of, I can’t afford it.”

Blankfein guffawed.

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