December 2, 2011

Judge Rakoff Says Goldman's Blankfein Can Testify in Insider Trading Case

Controversial Federal judge orders that deposition can be taken before Galleon insider trading trial.

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U.S. District Judge Jed S. Rakoff has signed an order that will allow Goldman Sachs chairman Lloyd Blankfein and six others to be deposed for an October civil trial before the April criminal trial of Rajat Gupta, a former member of the board of Goldman and Procter & Gamble who faces charges of insider trading.

Reuters reported that Gupta faces both criminal and civil trials, with Rakoff having scheduled the criminal trial to begin April 9 and the civil trial October 1. Gupta is accused by the SEC of giving inside tips about both companies on whose boards he served to Raj Rajaratnam of Galleon Group in 2008 and 2009. He denies the charges in the SEC's civil lawsuit, and is also contesting criminal insider-trading charges brought by the U.S. Attorney's Office in Manhattan. The cases, in the same court, are SEC vs. Gupta and Rajaratnam, U.S. District Court for the Southern District of New York, No. 11-07566, and United States vs. Rajat Gupta, No. 11-907.

Gupta's attorney Gary Naftalis told Rakoff that he wanted to depose Blankfein and other Goldman executives for the civil trial. Although it is customary when parallel cases are being conducted by both the SEC and the Department of Justice for the regulator's case to be suspended until the end of the criminal trial, Rakoff ordered that they can be deposed for the civil trial before the criminal trial begins.

In his written order, Rakoff said that he saw no reason to delay the depositions, since the government has indicated it is not likely to call the seven as witnesses at the criminal trial. He added that there was "sufficient time after the completion of the criminal case to complete all discovery while at the same time assuring that the parallel civil case will go forward to trial promptly."

To read more about the Rajaratnam case, go to AdvisorOne.com.

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