June 7, 2012 / 8:25 PM / 5 years ago

Blankfein says did not OK Gupta to share board info

4 Min Read

Goldman Sachs Chairman and Chief Executive Lloyd Blankfein smiles as he walks towards the Manhattan federal court in New York June 7, 2012.Andrew Kelly

NEW YORK (Reuters) - The chief executive of Goldman Sachs Group Inc told a federal court jury on Thursday that he did not authorize former board member Rajat Gupta to share information about the bank that was discussed at board meetings.

Goldman CEO Lloyd Blankfein returned to the witness stand for a second day, smiling broadly as he strode into the courtroom, to testify for the prosecution at Gupta's insider-trading trial.

Gupta, who sat on the Goldman board of directors until 2010, is fighting charges in U.S. District Court in Manhattan that he leaked inside information about the bank to now-imprisoned hedge-fund manager Raj Rajaratnam. Gupta faces a possible 25-year prison sentence if he is convicted on the charges of securities fraud and conspiracy.

Prosecutors contend that Gupta called into a March 12, 2007 meeting of Goldman's audit committee from the offices of Rajaratnam's Galleon Group. Minutes after the call ended, the government says, Gupta told Rajaratnam about Goldman's first-quarter 2007 earnings. The results were not publicly announced until the following day.

"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?" asked prosecutor Reed Brodsky.

"No," Blankfein answered in a firm voice. Neither Goldman nor Blankfein is accused of any wrongdoing in the case.

Prosecutors say Gupta, 63, illegally leaked confidential information to Rajaratnam between March 2007 and January 2009 while serving on the boards of Goldman and Procter & Gamble.

Lawyer Gary Naftalis, who questioned Blankfein for the defense, sought to establish that Gupta was a valued and trusted Goldman board member.

Early in September of 2008, Gupta submitted his resignation as a Goldman director in order to join the board of private equity firm KKR & Co LP. As Gupta's departure was being prepared, Goldman staff members presented him with cufflinks for his service to the bank, Blankfein told the court.

"You were honoring his good service to Goldman Sachs which was long and good?" Naftalis asked. "It wasn't long, but it was good," Blankfein responded, to laughter in the audience and a chuckle from Gupta, seated at the defense table.

But Blankfein told the court that he ultimately convinced Gupta not to leave Goldman's board because the departure, at the height of the financial crisis, might have raised eyebrows.

"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.

Only days later, Gupta is accused of tipping Rajaratnam on September 23, seconds after the Goldman board approved a $5 billion investment by Buffett's Berkshire Hathaway Inc.

Gupta ultimately did not leave the Goldman board until 2010, when his term expired.

Blankfein will return to court on Friday morning for more cross-examination. He began his testimony on Monday, but did not return to court until Thursday because of scheduling issues.

On Monday, he was asked about a June 2008 board meeting that he and Gupta both attended, telling the jury that "all parts of it were confidential."

Blankfein also testified for the government at Rajaratnam's trial last year.

Rajaratnam was convicted of conspiracy and securities fraud and is serving an 11-year prison term.

Gupta is a retired global head of the McKinsey & Co consulting firm. His lawyers say he had nothing to gain financially by passing inside tips to Rajaratnam, and they argue that the government has a weak circumstantial case.

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

Reporting By Basil Katz; Editing by Martha Graybow and Tim Dobbyn

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