Goldman Sachs CEO Describes 'Secret Meetings' at Insider Trading Trial
NEW YORK — The CEO of Goldman Sachs, Lloyd Blankfein, told a New York federal court that his former colleague Rajat Gupta regularly attended highly confidential board meetings.
The chief executive took the stand for the second time in as many years to testify about Gupta, accused in one of the highest profile insider trading cases for years.
Talks at board and committee meetings on which Gupta sat -- before allegedly passing insider tips to hedge fund manager Raj Rajaratnam -- were not for public consumption, Blankfein said.
"You're not supposed to discuss," he said.
Referring to a 2008 strategy meeting held by the powerful US bank in Saint Petersburg, Russia, he said: "The fact it was in the board meeting meant it was confidential."
Blankfein is one of the biggest witnesses prosecutors are using against Gupta, an Indian-born immigrant who reached the pinnacle of US business. The former Goldman board member was also on the board of Procter & Gamble and the director of McKinsey & Co.
Gupta is accused of feeding non-public information to Galleon Group founder Rajaratnam, who was sentenced last year to 11 years in prison for insider trading. In that trial, Blankfein also testified for the government.
Gupta's defense lawyers argue that Rajaratnam had many ways to obtain confidential information and that there is no smoking gun to show Gupta was that source -- or even that he profited from any of Rajaratnam's trades.
Blankfein, one of America's most influential bankers, appeared jovial and often made eye contact with the jury, sometimes making a light-hearted comment, then turning to smile both at the jury and judge. A nervous-looking Gupta watched his former associate steadily.
Lawyers on both sides sparred continuously during Blankfein's testimony. The defense team interrupted prosecutor Reed Brodsky more than a dozen times to object to his line of questioning.
During a break, with the jury out of the room, an exasperated Judge Jed Rakoff admonished the squabbling attorneys.
"We have wasted far too much time in this trial arguing every little point to the 'nth degree and I don't want to hear anything more from either side," he said.
In his testimony, Blankfein detailed some of the major news events that were discussed in private at Goldman and which Gupta allegedly passed on to Rajaratnam. This included the surprise $5 billion investment by Warren Buffett's Berkshire Hathaway into Goldman right in the midst of the 2008 US financial meltdown.
Blankfein explained how such news was handled carefully within Goldman, with the board first meeting to discuss the press release that "announced to the world."
The Goldman executive is expected to resume his direct testimony on either Wednesday or Thursday, followed by cross-examination.
Although he is a star witness and a pillar of Wall Street, Blankfein saw the limits of his sway tested in court -- over plans to delay his return to the witness stand so that he can celebrate his daughter's high school graduation.
Asking Rakoff that he be excused on Wednesday because he would not have time to reach the Manhattan courthouse from the graduation party in Yonkers, Rakoff dryly noted that he lived in the area himself and knew exactly how long it took to travel.
Blankfein then explained that after the graduation ceremony he had planned to attend a lunch at a restaurant with his daughter.
Rakoff showed little sympathy, saying: "If it's the restaurant I'm thinking of, I can't afford it."
Blankfein later told reporters he'd rather tussle with the judge than his wife over the issue. That, he said, was "the path of least resistance."