Blankfein To Testify In Rajaratnam Trial, Lawyers Spar Over Scope Of Questions

Mar 23 2011 | 3:24am ET

Prosecutors will call Goldman Sachs CEO Lloyd Blankfein to the stand in the Raj Rajaratnam insider-trading trial, possibly as soon as this week.

Blankfein is expected to testify that he told Goldman's board—including former McKinsey & Co. chief and Rajaratnam friend Rajat Gupta—about the investment bank's 2008 earnings and a $5 billion investment in the firm by Berkshire Hathaway, allowing prosecutors to connect the dots from Gupta to Rajaratnam. Gupta has been accused by the Securities and Exchange Commission of passing tips about Goldman and Procter & Gamble, on whose board he also served, sometimes within minutes of board meetings.

But prosecutors don't want the case to become about Goldman or its own alleged misdeeds, asking U.S. District Judge Richard Holwell to force Rajaratnam's defense team to go easy on the Goldman chief.

"Were Mr. Blankfein's testimony regarding the actions of one board member, Rajat Gupta, to become the vehicle through which he is called upon to answer questions regarding any number of unrelated pending proceedings, there would be a serious danger of prejudice and confusion," prosecutors wrote to the judge.

"Rajaratnam might suggest, for example, that because Goldman Sachs is tied up in many different legal proceedings, the firm—and by extension its CEO, Mr. Blankfein—is not to be trusted."

They have good reason to worry: Rajaratnam's lawyers earlier this month subpoenaed Goldman for "documents sufficient to show currently active investigations" of the firm by the Justice Department or SEC. The Galleon Group founder's lead lawyer, John Dowd, told Holwell in his letter that he might ask Blankfein if he were testifying "in the hopes of obtaining a better resolution" of government probes.

"There is absolutely no support for such a claim; it is entirely false," prosecutors wrote. "The government has made no promise, explicit or implicit, direct or indirect, express or implied that Mr. Blankfein or Goldman Sachs will receive anything at all in exchange for his testimony."

Holwell said he would hear oral arguments about Blankfein's appearance this morning, before testimony begins again in the case. Dowd told the judge that the Goldman CEO could be called "as early as this week," although that appears unlikely, given that tomorrow is scheduled to be the last day of testimony for the week.


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