NEW YORK, May 23 (Reuters) - The deal that gave Goldman
Sachs Group Inc a $5-billion boost from renowned investor Warren
Buffet at the height of the 2008 financial crisis was "as top
secret as you could get," a leading banker testified on
Wednesday at the insider-trading trial of onetime Goldman board
member Rajat Gupta.
Gupta is accused of tipping Galleon hedge fund founder Raj
Rajaratnam about the deal in an illegal breach of his fiduciary
Separately, a prosecutor told the judge on Wednesday, during
a jury break, that a Goldman managing director, David Loeb,
provided Rajaratnam with information about Intel Corp, Apple Inc
and Hewlett Packard.
Loeb's name also came up Tuesday in evidence to the
Manhattan federal court jury hearing the Gupta trial. A key
defense argument is that Rajaratnam had sources other than Gupta
to provide him confidential company information.
Loeb has not been charged. A Goldman spokesman declined to
Former Goldman banker Byron Trott, a long-time Buffett
confidant, told the jury that it was policy within a
tightly-knit group of executives who negotiated such deals
"never to talk about confidential information in public, or
elevators. It was grounds for being fired."
Called to testify by prosecutors on the third day of Gupta's
trial, Trott described how the deal was finalized in 30 or 40
minutes on the afternoon of Sept. 23, 2008.
"Warren was not reachable until 2:30 p.m. He told me he
promised to take his grandkids to Dairy Queen," said Trott, who
left Goldman in 2009 and now runs his own merchant bank.
Gupta, 63, is accused of providing now-imprisoned Rajaratnam
with boardroom secrets between March 2007 and January 2009 while
he was a director of Goldman and Procter & Gamble.
One of the allegations is that Gupta tipped Rajaratnam, his
erstwhile friend and business associate, 16 seconds after the
Goldman board approved the Buffett investment, which was just
minutes before markets closed at 4 p.m. on Sept. 23, 2008.
That day, Rajaratnam ordered his traders to buy Goldman
stock, but the Buffett deal was not made public until about two
hours after trading ended, according to trial evidence.
"This was about as top secret as you could get," Trott said
of the negotiations that led to Buffett's investment in Goldman.
Gupta, who has pleaded not guilty to five counts of
securities fraud and one count of conspiracy, sat at the defense
table with his hands folded in his lap, listening to Trott.
"It was a major, major event to Goldman Sachs and to the
marketplace. Five billion dollars was not easily found at this
time," Trott said, alluding to the lack of liquidity as
financial institutions such as Lehman Brothers failed.
In opening statements on Monday, a U.S. prosecutor told the
jury that Gupta "threw away his duties" to the companies and
their shareholders. The jury includes an executive of a
non-profit organization, a psychiatric nurse, a professor and an
elementary school teacher.
William George, a director at Goldman since 2002, is also
expected to testify for the government, as is the investment
bank's chief executive, Lloyd Blankfein. The trial started on
Monday and is expected to last about three weeks.
Gupta could be sentenced to prison if convicted. However,
any sentence is unlikely to be as long as the 11 years handed to
Rajaratnam, who was convicted in the same court a year ago.
The case is USA v Gupta, U.S. District Court for the
Southern District of New York, No. 11-907.
For USA: Reed Brodsky of the U.S. Attorney's Office
For Gupta: Alan Friedman of Kramer Levin Naftalis & Frankel
(Reporting by Grant McCool)
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