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June 5, 2012 12:34 am
Lloyd Blankfein, chief executive of Goldman Sachs, testified in the insider trading trial of Rajat Gupta, a former director of the bank, that board discussions were supposed to be kept secret.
“You’re not supposed to reveal what was discussed at board meetings,” Mr Blankfein, dressed in a navy suit and red tie, told the jury during two and a half hours of testimony Monday afternoon. The content of board discussions was “confidential”, he said.
Mr Blankfein’s testimony came in the third week of the trial of Mr Gupta, who is accused of passing confidential information to his former friend and business partner Raj Rajaratnam about Goldman’s first quarter 2007 earnings, a $5bn investment in the bank by Warren Buffett in September 2008 and an October 2008 earnings warning. Mr Gupta has denied any wrongdoing.
Prosecutors showed the jury documents indicating Mr Gupta attended audit committee meetings when quarterly earnings were discussed, often one day before the results were announced to the public. In March 2007, Goldman beat analyst estimates of $4.90 earnings per share when it reported record earnings of $6.67 per share.
Prosecutors allege Mr Gupta called Mr Rajaratnam within 25 minutes of disconnecting from that audit committee call when those earnings were discussed. Mr Rajaratnam’s hedge fund Galleon subsequently bought 350,000 shares of Goldman before the public announcement.
Mr Blankfein smiled often at the jury. During a break, as he was leaving the courtroom, Mr Blankfein looked at Mr Gupta and, with a slight nod and raised eyebrows, acknowledged him. No other witness appeared to make eye contact with Mr Gupta.
During the presentation of documents, the courtroom buzzed late Monday when word circulated that celebrity Paris Hilton had arrived at the courthouse for an unrelated matter.
The trial will resume Wednesday, when Mr Blankfein may continue his testimony and face questions from Mr Gupta’s lawyers. However, Judge Jed Rakoff said he would try to accommodate Mr Blankfein’s desire to attend his daughter’s high school graduation that day, possibly delaying his testimony until Thursday.
The judge also rejected a government effort to present evidence that Mr Gupta allegedly tipped Mr Rajaratnam following a board call about Goldman’s earnings in the quarter ending May 2008. He left open the possibility that he would let the government include it to depict Mr Gupta’s state of mind.
Lawyers for the government and defence alternately objected to various documents Monday, causing Judge Rakoff to remark, outside of the jury’s presence: “We have spent far too much time in this trial arguing every little point to the nth degree.”
The government is expected to rest its case by Thursday, when Mr Gupta’s attorneys will begin presenting their case.
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