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| Lloyd Blankfein |
A financial heavy hitter came to the plate yesterday and whacked the defense with his bat. Lloyd Blankfein testified that Rajat Gupta, once a board member and former head of McKinsey & Co., violated Goldman Sachs policies by passing insider information to Galleon founder Raj Rajaratnam. Some of that information regarded Berkshire Hathaway’s investment in Goldman. Gupta denies wrongdoing, and is being sued by the SEC.
Blankfein testified for about three hours, confirming the confidentiality of tips on a wiretap between Rajaratnam and Gupta recorded in July 2008. Prosecutor Andrew Michaelson asked Blankfein whether Gupta had violated Goldman’s rules during the wiretapped conversation. Blankfein agreed that it was a violation.
The conversation also featured Gupta telling Rajaratnam about Goldman perhaps buying a commercial bank like Wachovia and an insurance company like American International Group:
"Have you heard anything along that line?" Rajaratnam asked.
"Yeah," Gupta said. "There was a big discussion at the board meeting."
"At the time, were Goldman Sachs board members authorized to confirm or deny rumors?" Michaelson asked.
"No," Blankfein said.
"At the time, was Rajat Gupta authorized to confirm or deny rumors about Goldman Sachs?"
"No," Blankfein answered.
"In this telephone call, did Rajat Gupta violate Goldman Sachs policies?"
"Yes," Blankfein testified.
"We are a public company," Blankfein said. "We don't want information about our company to get outside before the time is appropriate. There is a process and a protocol for speaking to the outside world."
"We were losing money," Blankfein said.
"What was the significance of that?" Michaelson asked.
"We generally make money," a comment that drew some light laughter from the crowd.
"The board's reaction, even to a public topic, would be confidential, because it emanates from the board," Blankfein explained.
© 2011 Hedge Fund Writer LLC
