Goldman's Blankfein On Rajaratnam Trial Witness List

Mar 4 2011 | 11:30am ET

One of the biggest names on Wall Street is set to testify against Raj Rajaratnam at the Galleon Group founder's insider-trading trial.

Goldman Sachs CEO Lloyd Blankfein has agreed to testify for the prosecution in the trial, set to begin on Tuesday. News of Blankfein's possible appearance comes as Rajaratnam's lawyers complained about a Securities and Exchange Commission action over the very issue Blankfein is likely to testify about.

There is no guarantee that Blankfein will, in fact, testify. But if he does, prosecutors are likely to use him to further their allegation that a former Goldman board member, Rajat Gupta, passed confidential information about Goldman's fourth quarter 2008 earnings to Rajaratnam.

Gupta allegedly called Rajaratnam to give him the information less than a minute after Blankfein ended a conference call with Goldman directors to discuss the results. Blankfein's testimony could serve to demonstrate where Gupta got the information. Neither Blankfein nor Goldman is accused of any wrongdoing.

Galleon allegedly earned nearly $1 million trading on the Goldman information.

Meanwhile, Rajaratnam's lawyers blasted the SEC's lawsuit against Gupta, filed this week, warning that it "jeopardized" their client's ability to get a fair trail. John Dowd, Rajaratnam's lead attorney, told U.S. District Judge Richard Holwell that he was preparing Gupta, the former head of consulting firm McKinsey & Co., to serve as a defense witness and had asked the SEC to hold off on filing the case.

"There was no need to file these charges just one week before jury selection," Dowd complained.

"The overwhelming publicity from this action by the SEC has seriously jeopardized Rajaratnam's ability to seat an impartial and unbiased jury," Dowd wrote. He asked for more latitude in questioning potential jurors next week.

"It is simply inexplicable that they did not act to stop this pollution of this jury pool," Dowd said of prosecutors. "One is left to conclude this was a deliberate attempt to pollute this jury pool and deny Mr. Rajaratnam his right to an impartial jury."

The SEC this week filed civil charges against Gupta, a longtime Rajaratnam friend and business partner, accusing him of giving the hedge fund manager confidential information both about Goldman and Proctor & Gamble, on whose board he also sat.

Gupta, in an e-mail to the dean of the Indian School of Business, which he co-founded, said he has "done nothing wrong" and called the SEC allegations "totally baseless."

"There are no tapes or any other direct evidence of me tipping Mr. Rajaratnam," Gupta wrote. "I did not trade any of the securities involved, nor did I share in any of Mr. Rajaratnam's profits."

What's more, Gupta said, at the time he is accused of passing the tips, the "business relationship between Mr. Rajaratnam and I were [sic] strained."

What's more, Dowd told Holwell that Gupta gave the SEC "powerful evidence that Mr. Gupta and Mr. Rajaratnam did not engage in insider trading." Much of that information was new, Dowd said.

Potential jurors in the case—about 300 of them—were already in court this week to fill out questionnaires. The 16-page document asked potential jurors if serving on the panel at the trial, expected to last six to eight weeks, would be a hardship. It also included questions about their feelings about Wall Street executives.


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