San Francisco Goldman Banker May Have Tipped Galleon

Apr 26 2012 | 2:43pm ET

Federal authorities are investigating a San Francisco-based Goldman Sachs banker for allegedly tipping off a Galleon Group portfolio manager about an impending merger.

Matthew Korenberg may have given Galleon's Paul Yook advanced word of Abbott Laboratories' 2009 acquisition of Advanced Medical Optics, The Wall Street Journal reports. Korenberg worked on the deal.

The existence of the probe was revealed last week by former McKinsey & Co. chief Rajat Gupta's defense lawyer. Federal prosecutors in New York gave Korenberg's name to Gupta's lawyers, but it was not made public. Korenberg would be the fourth possible source of insider-information that Galleon had access to at Goldman; Gupta is seeking to show that others could have passed the information he is charged with giving Galleon.

The probe into Korenberg is being handled by federal prosecutors in Los Angeles and the Securities and Exchange Commission. Neither he nor Yook, a former healthcare manager at Galleon, have been accused of any wrongdoing.

In addition to Korenberg, two other Goldman executives, top salesman David Loeb and Taiwan research chief Henry King, have been identified as alleged Galleon sources.

Meanwhile, another line of Gupta's planned defense at his trial next month has emerged. It involves another former friend and business partner of his and Galleon founder Raj Rajaratnam's, Ravi Trehan.

Trehan is expected to testify at Gupta's trial that he never received any confidential information from Gupta, and that the relationship between Gupta and Rajaratnam had broken down prior to Gupta's alleged passing of insider tips.

Rajaratnam, who is serving 11 years in prison for insider-trading, Gupta and Trehan, a principal at Broadstreet Group, co-founded Voyager Capital Partners in 2005. Trehan pulled out a year later amidst conflicts with Rajaratnam, but Gupta stayed in until the end, to his detriment: Voyager was wiped out by the Sept. 15, 2008, collapse of Lehman Brothers.

According to prosecutors, Gupta tipped Rajaratnam about Berkshire Hathaway's impending investment in Goldman Sachs, on whose board Gupta served, a week later. Prosecutors say that Gupta called Galleon 16 seconds after getting off a Goldman board conference call where he learned about the Berkshire investment.

But after that 56 second conversation, he called Trehan. According to Trehan, Gupta said nothing about the Berkshire deal, and neither Trehan nor Broadstreet owned any Goldman shares when the deal was made public.

Indeed, Trehan, who remains friends with Gupta, says Gupta never gave him any insider information.

In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...


Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...