Bloomberg News

Goldman’s Blankfein Was Prepped by U.S., Gupta’s Lawyer Says

March 03, 2012

Lawyers for Rajat Gupta, the former Goldman Sachs Group Inc. (GS) director accused of passing inside tips, said prosecutors in the case conducted preparation sessions with Goldman Sachs Chief Executive Officer Lloyd Blankfein before his Feb. 24 deposition.

Blankfein, who testified as a prosecution witness at the insider-trading trial of Galleon Group LLC co-founder Raj Rajaratnam, was questioned as part of a parallel insider-trading lawsuit brought by the U.S. Securities and Exchange Commission against Gupta, who was charged in October with passing nonpublic information to Rajaratnam.

“Does Goldman Sachs have any interest in the outcome of this litigation?” Gary Naftalis, Gupta’s lawyer asked Blankfein at the end of the deposition that began at 10:22 a.m. and concluded at 7:14 p.m.

“No,” Blankfein replied.

Excerpts from the Blankfein transcript were attached to the defense lawyers’ letters to U.S. District Judge Jed Rakoff, who is presiding over both cases.

Blankfein, who might be a prosecution witness against Gupta, said during the day-long deposition that he had participated in two sessions in which Assistant U.S. Attorney Reed Brodsky, who is prosecuting Gupta, asked “three-quarters” of the questions. The sessions were held at Goldman Sachs, Blankfein said.


Federal Bureau of Investigation agents were also present at the preparatory sessions, as well as SEC representatives, Naftalis said in a March 1 letter to Rakoff.

The excerpts also show that SEC lawyers objected numerous times to questions Naftalis asked about the government’s preparation of Blankfein, citing a legal privilege barring Gupta from discovering information about its legal strategy and the thought processes of its lawyers.

Naftalis has asked Rakoff to allow Gupta’s defense team to resume questioning Blankfein about these preparations and require the SEC to provide Gupta with the documents shown to Blankfein during the sessions. While Naftalis didn’t allege anything improper occurred during the preparation sessions, he said he’s seeking the documents used to help prepare Blankfein.

“The SEC’s attempt to withhold from disclosure the documents shown to Mr. Blankfein by Mr. Brodsky to refresh his recollection fails,” Naftalis said in the letter to Rakoff.

“There can be no dispute that Blankfein is a key witness with respect to the allegations against Mr. Gupta,” Naftalis said. “It is therefore in the ‘interests of justice’ to permit Mr. Gupta to cross-examine these documents.”

‘Other People’

“Have you learned whether or not other people at Goldman Sachs besides yourself have been interviewed by representatives of the prosecution in connection with this matter?” Naftalis asked Blankfein, according to the excerpts.

Steven Peikin, a lawyer for Blankfein interrupted saying, that the questioning would “tread into a privileged area.”

Naftalis also asked Blankfein about whether other Goldman Sachs board members had independent relationships with large investors in the firm.

“I can’t think of it, but inevitably,” Blankfein replied.

Rakoff ruled in November that Blankfein could be questioned before Gupta’s criminal trial.

Gupta, who denies wrongdoing, was charged in October with leaking information about Goldman Sachs and Procter & Gamble to Rajaratnam, who was convicted last year and is serving an 11- year prison sentence. Gupta was also a director at P&G.

16 Seconds

Prosecutors said Gupta passed illegal tips to Rajaratnam, including one after participated by telephone in a Sept. 23, 2008, Goldman Sachs board meeting that concluded before the close of the New York Stock Exchange.

During the meeting, Goldman agreed to accept a $5 billion investment from Warren Buffett’s Berkshire Hathaway Inc., the U.S. said. Sixteen seconds after hanging up and two minutes before the market closed, Gupta called Rajaratnam, according to prosecutors said. Rajaratnam caused Galleon funds to purchase $27 million in Goldman Sachs Shares, earning a $840,000 profit, the U.S. said.

A month later on Oct. 23, 2008, Rajaratnam avoided losses on Goldman Sachs, prosecutors said, after Gupta was told during a board meeting that the company had lost almost $2 a share, worse than Wall Street’s expectations.

Banks Policies

At Rajaratnam’s trial, Blankfein testified that Gupta violated the bank’s policies by allegedly telling the defendant about the company’s confidential board discussions, results and plans.

Blankfein said Gupta and other board members were told in October 2008 that Goldman Sachs was facing the possibility of a quarterly loss for the first time since it went public in 1999.

During the deposition, Naftalis also asked Blankfein what was asked in the prep sessions about Goldman Sachs’s strategy to acquire a commercial bank and about the 2008 investment by Warren Buffet’s Berkshire Hathaway Inc.

Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment on Naftalis’s letter.

The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court for the Southern District of New York (Manhattan).

To contact the reporters on this story: Bob Van Voris in New York at; Patricia Hurtado in New York at

To contact the editor responsible for this story: Michael Hytha at

The Aging of Abercrombie & Fitch
blog comments powered by Disqus