What was going through the mind of Raj Rajaratnam on Wednesday as he heard super banker Lloyd C. Blankfein testify that Rajaratnam’s friend, Rajat K. Gupta, had improperly relayed important and confidential information to Rajaratnam?
We may never know. Rajaratnam once said that risk-taking was the key to his success, and that it “gets my adrenaline pumping.” If so, his adrenaline must have been going full blast as he heard Blankfein, the chief executive of Goldman Sachs, tell a federal court jury in Manhattan about some of the events of the summer and fall of 2008.
In their bulging quiver of evidence, prosecutors have numerous tape-recorded phone calls in which Rajaratnam and other people say things that prosecutors say show Rajaratnam engaging in highly profitable insider trading. A key telephone exchange took place in July 2008, when Gupta, a business consultant then on the Goldman board, talked with Rajaratnam about some Goldman matters.
Did that call violate Goldman’s confidentiality policy?
“Ah…yes,” Blankfein told the prosecutor, according to an account on The New York Times’ website.
Rajaratnam asked Gupta about a rumor that Goldman might be looking for a big commercial bank to gobble up.
“Yeah,” Gupta replied, according to The Times. “This was a big discussion at the board meeting. And you know it was a uh, divided discussion in the board.”
So, Blankfein was asked again, was that chat in violation of Goldman’s confidentiality policy?
“My sense of it, yes,” replied Blankfein, perhaps the government’s most prominent and eagerly awaited witness.
As recounted by The Times, Blankfein recalled that crisis-driven period as “volatile” and “dangerous” and one to make people “nervous.” No argument there.
Gupta has been accused by the Securities and Exchange Commission, in an administrative proceeding, of insider trading. In the Rajaratnam trial, he has been named as a co-conspirator, although he has not been charged.
The government’s theory is that the adrenaline-loving Rajaratnam, billionaire founder of the Galleon Group LLD hedge fund, made some $45 million on illegal trades, using information gleaned from insiders like Gupta (who has termed the SEC’s accusations baseless, as we have reported.)
It will probably be weeks before the U.S. Attorney for the Southern District of New York, Preet Bharara, learns if he has enough evidence to convince the jury of Rajaratnam’s guilt beyond a reasonable doubt and send Rajaratnam away for up to 20 years.
Meanwhile, there’s no doubt at all that the trial offers tantalizing glimpses into the world of high finance and high rollers. Here is some of the information that Gupta had access to — and, by extension, that Rajaratnam had access to, if the prosecution’s theory is upheld.
In a meeting on Sept. 23, 2008, Goldman board members discussed a $5 billion investment in their bank by the investor Warren E. Buffett, perhaps the only person mentioned so far who has more money than the defendant. The Buffett investment was not yet public, but would be hours later.
“Was the Buffett announcement good news or bad news for Goldman?” asked the prosecutor, Andrew Michaelson.
“Good news,” Blankfein replied.
“Big news or small news?”
“Big news.”
Several weeks later, there was another Goldman board meeting. The mood was somber.
“We were losing money,” Blankfein explained.
“What was the significance of that?” Michaelson said.
“We generally make money,” Blankfein said, smiling.
Who said this case is complicated?
