March 4, 2011

Goldman Sachs’ Blankfein May Testify in Galleon Case

CEO expected to give information on former board member accused of insider dealing

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Goldman Sachs Chief Executive Lloyd Blankfein has reportedly been called to testify for the prosecution at the insider trading trial of Raj Rajaratnam, billionaire founder of the Galleon Group hedge fund.

Blankfein’s appearance as a witness for the U.S. government, which would come after the trial’s start on Tuesday in Federal District Court in Manhattan, is not assured. However, the Goldman CEO has agreed to testify, according to a report in The New York Times’ Dealbook blog.

If Blankfein testifies, federal prosecutors are expected to use him to support their allegation that a former Goldman board member, Rajat Gupta, passed confidential information about Goldman's fourth-quarter 2008 earnings to Rajaratnam. The Securities and Exchange Commission on Tuesday accused Gupta of the secret dealings.

The SEC charges that Gupta discussed with Rajaratnam confidential information about Goldman’s earnings results for fourth-quarter 2008.

“After a board call during which Mr. Blankfein and David Viniar, the chief financial officer, previewed the bank’s awful quarter for the directors, Mr. Gupta is said to have hung up the phone and called Mr. Rajartnam 23 seconds later,” said the Dealbook report.

The high-profile Galleon Group case has been underway since October 2009, when feds arrested Rajaratnam and charged him with securities fraud and conspiracy.

Last spring, Mark Kurland, a co-founder of the $1 billion New Castle hedge fund that operated as the equity hedge fund group of Bear Stearns Asset Management, was sentenced to two years and three months in jail and ordered to forfeit the $900,000 he earned in illegal insider trades. The 61-year-old executive from Mount Kisco, N.Y., was the first to be sentenced in the Galleon Group case.

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