Blankfein Says He Was Aware of Then-Director's Link to Trading Case; Bank Waited for Him to Quit
Goldman Sachs Group Inc. took no action against a high-profile board member for several months despite indications prosecutors were scrutinizing whether he had passed along inside information.
In testimony in the Galleon insider-trading trial, Goldman Chief Executive Lloyd Blankfein said he 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. Mr. Gupta stepped down as a Goldman director in May 2010.
Goldman first became aware Mr. Gupta might be involved in the Galleon investigation in December 2009, a person familiar with the matter said. Goldman asked Mr. Gupta and the government for more information but only became aware of the depth of Mr. Gupta's involvement in the probe after he left Goldman's board, the person said.
Mr. Blankfein declined to comment after his testimony, and a Goldman spokesman declined to comment on his behalf.
As a witness for the government, Mr. Blankfein testified that Mr. Gupta violated Goldman policies when he allegedly gave Galleon Group hedge-fund founder Raj Rajaratnam information he learned during Goldman board meetings.
Prosecutors say Mr. Gupta is a co-conspirator in the insider-trading case. The Securities and Exchange Commission has alleged in a civil proceeding that Mr. Gupta passed inside information to Mr. Rajaratnam. Mr. Gupta hasn't been charged criminally; he has denied wrongdoing through his lawyer.
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