Legal News

More on Blankfein?s Odd Little Day With the Criminal-Justice System

By Ashby Jones

Lloyd Blankfein came and Lloyd Blankfein went.

The bottom line on the testimony of the Goldman Sachs CEO in the Galleon Group insider-trading case: it’s unlikely to seal the deal for the government.

That’s largely because Blankfein’s testimony was used for a limited, discrete purpose: to confirm that meetings attended by former Goldman director Rajat Gupta were, in fact, supposed to be confidential. The government contends that Gupta leaked certain information — chiefly information arising out of two Goldman board meetings in the fall of 2008 — to former Galleon head Raj Rajaratnam, who then illegally traded on the information. Click here for the WSJ story; here for the NYT story; here for the Bloomberg story.

But other interesting tidbits did come out of Blankfein’s testimony. He said he took no action against Gupta for several months despite indications prosecutors were scrutinizing whether he had passed along inside information.

He said had “an awareness of-I want to say inkling”-that the activities of the director, Rajat Gupta, were under scrutiny by prosecutors in March 2010, when Goldman announced he wouldn’t stand for re-election. Gupta stepped down as a Goldman director in May 2010.

On cross-examination, Rajaratnam’s lawyer, John Dowd, grilled Blankfein on a March 19, 2010, news release by Goldman, saying Mr. Gupta was stepping down from the board.

“Rajat has made important contributions to Goldman Sachs as a board member,” Mr. Blankfein was quoted as saying in the release. “His independent advice, keen understanding of the issues and belief in our culture has had a tremendous impact on our firm.”

Dowd asked Blankfein: “At the time you made this statement, Mr. Blankfein, you were aware of the allegations made against Mr. Gupta by the government, correct?”

“I knew there were some questions about Rajat’s behavior. That’s how I would say it,” Blankfein responded.

One strange moment: At a lunch break when the jurors had left the courtroom, Blankfein headed toward Rajaratnam, shook his hand and exchanged words with his legal team.

Full post as published by Law Blog - WSJ.com on March 24, 2011 (boomark / email).