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Goldman CEO appears at insider trading trial

NEW YORK (AFP) – Goldman Sachs boss Lloyd Blankfein took to the stand Wednesday, telling jurors at a high-profile insider trading trial that one of the storied bank’s ex-directors leaked sensitive company secrets.

Blankfein admitted former Goldman director Rajat Gupta broke the firm’s confidentiality rules by giving on-trial hedge fund manager Raj Rajaratnam an inside take on the bank’s possible acquisitions.

Rajaratnam, who worked for the Galleon Group, is accused by the government of creating a corrupt network of informants to rack up millions of dollars in fraudulent profits.

Blankfein appeared in a somber dark suit and blue tie before the New York court, where he heard a recording of Gupta and Rajaratnam discussing rumors that Goldman’s board “might be about to buy a commercial bank.”

“This was a big discussion at the board meeting,” Gupta said during a 2008 call, which was secretly taped.

“It was a divided discussion,” he said, adding that he would be “extremely surprised if anything is imminent.”

After being played the recording, Blankfein was asked if Gupta had broken the company’s confidentiality policies.

“Yes,” Blankfein replied.

Rajaratnam’s lawyers argued their client was just doing his job, trying to clarify information that was already circulating in the press.

Blankfein’s appearance in court as a government witness provided jurors with a rare look inside one of Wall Street’s most secretive firms.

The case is being eagerly watched by traders, as much for its personality theater as for new guidelines on what constitutes insider trading.

Earlier in the proceedings, US assistant attorney Jonathan Streeter said Rajaratnam “cheated” to benefit from illegal insider tips even as the US financial sector was in meltdown in 2008.

But defense attorney John Dowd countered that the Sri Lankan-born 53-year-old was nothing more than a brilliant entrepreneur whose Galleon hedge fund used legal, public information and “the best research in the business.”

The government case rests largely on wire-tap conversations allegedly showing Rajaratnam cultivating illegal information, and the testimony of former associates and colleagues who have already been convicted and are cooperating with the government.

Gupta, who was also a Procter Gamble director, is accused by the Securities and Exchange Commission of giving Rajaratnam “information about the quarterly earnings at both firms, as well as an impending $5 billion investment by Berkshire Hathaway in Goldman.”

The watchdog described Gupta as “a friend and business associate of Rajaratnam.”

Gupta, a Connecticut-based business consultant and former managing director of global consulting firm McKinsey Company, was also accused of being a direct or indirect investor in at least some of Rajaratnam’s Galleon hedge funds.