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Galleon: Goldman CEO may testify

business Updated: Mar 04, 2011 21:30 IST
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The chief executive of Goldman Sachs, Lloyd C. Blankfein, has emerged as a possible witness in the insider trading trial of Raj Rajaratnam.

Blankfein has agreed to testify for the government in the trial of Rajaratnam, a founder of the Galleon Group hedge fund, according to a person with direct knowledge of the case who spoke only on the condition of anonymity. Rajaratnam’s trial is scheduled to start on Tuesday in federal court in Manhattan.

Federal prosecutors could call Blankfein as a witness to discuss his conversations with Rajat K. Gupta, a former Goldman director who on Tuesday was accused by the securities and exchange commission (SEC) of passing along confidential information about the bank to Rajaratnam.

“Goldman Sachs Group CEO Lloyd C Blankfein has agreed to testify for the US government at the coming trial of Rajaratnam,” The Wall Street Journal reported, citing people familiar with the matter.

The government has numerous cooperating witnesses and scores of wiretapped conversations that it has said it plans to use against Rajaratnam.

But should Blankfein take the witness stand, it would add to the already intense attention surrounding the high-profile trial.

Rajaratnam is the central figure in the government’s vast investigation into insider trading on Wall Street. Federal authorities arrested Rajaratnam in October 2009 and charged him with securities fraud and conspiracy. Blankfein, 56, may not be the only Goldman executive to testify.

In a letter filed with the court on Thursday, John Dowd, a lawyer for Rajaratnam, said that he was likely to call executives from Goldman and Procter & Gamble, where Gupta is a former director. The government also accused him of providing Rajaratnam with illegal tips about P.&G.

“The government’s witness list includes numerous Goldman Sachs and Procter & Gamble representatives who will presumably provide testimony on the very issues in the SEC lawsuit,” the letter said.

Were Blankfein to testify, he would likely discuss his conversations with Gupta that are at the center of the SEC’s civil action against Gupta.

In one instance, the SEC. claims that in Gupta discussed with Rajaratnam confidential information about Goldman’s quarterly earnings results for the fourth quarter of 2008. After a board call during which Blankfein and David Viniar, the chief financial officer, previewed the bank’s awful quarter for the directors, Gupta is said to have hung up the phone and called Rajartnam 23 seconds later.

The next morning, the S E C says, Galleon funds sold their Goldman holdings, avoiding losses of more than $3 million.

Among the other Goldman tips that the SEC said Gupta provided to Rajaratnam was word that Warren E. Buffett would invest $5 billion in the bank in September 2008 as the financial crisis raged.