Saturday, 26 July 2014
Last updated 19 hours ago
Jun 8 2012 | 12:21pm ET
Goldman Sachs CEO Lloyd Blankfein returned to the witness stand at the Rajat Gupta insider trading trial yesterday—and will be back today for his third day of testimony.
Blankfein told the jury that he did not authorize Gupta to discuss matters dealt with at Goldman board meetings with outsiders. Gupta is accused of passing tips about Goldman and another company on whose board he served, Procter & Gamble, to Galleon Group founder Raj Rajaratnam.
"Did you authorize Mr. Gupta on March 12, 2007, to disclose any information learned during that audit committee meeting to any outsider prior to it being public?" prosecutor Reed Brodsky asked of a date when the committee discussed the bank's first-quarter earnings. Gupta participated in the conference call from Galleon's offices.
"No," Blankfein said.
Gupta's lawyers sought to demonstrate their clients' good reputation, asking Blankfein why he asked Gupta not to resign in 2008, when the former McKinsey & Co. chief wanted to join the Kohlberg Kravis Roberts board.
"It might be perceived that he was resigning because of the crisis and because of something that was going on at Goldman Sachs," Blankfein said. But he also acknowledged that Gupta was presented with cufflinks in honor of his service when his board term expired in 2010.
"You were honoring his good service to Goldman Sachs, which was long and good?" Gupta lawyer Gary Naftalis asked.
"It wasn't long, but it was good," Blankfein said, eliciting laughter from the courtroom, including from Gupta.
But while Blankfein provided some star power to the proceedings—as he will again today, much to the chagrin of U.S. District Judge Jed Rakoff, who has complained about the pace of the trial and had hoped to finish with the Goldman chief yesterday—prosecutors may have scored more points with the jury with the testimony of a Federal Bureau of Investigation agent.
James Barnacle Jr. used a series of summary charts to track and match up the phone calls and trading data at the heart of the prosecution's case. First, Barnacle showed charts showing Gupta's participation in Goldman and Procter conference calls dealing with earnings. Then, he walked the jury through charts showing trading aberrations in those companies' stock by Galleon prior to the earnings announcements, finishing the presentation with press releases announcing the earnings and spreadsheets showing Galleon's allegedly ill-gotten gains from its aberrant trading, including a $2 million profit on the alleged first quarter 2012 results tip.
On another occasion, Barnacle testified, Gupta's tip helped Galleon skirt a $3.8 million loss. All told, Galleon made more than $10 million on Gupta's tips, he said.
On cross-examination, defense lawyers pointed out that on at least two occasions Galleon lost money on an alleged tip from Gupta about Procter.
"So you made charts for trading profits but not for losses, correct?" David Franken asked.
"No, I did not," Barnacle said.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…