Goldman Sachs (GS) CEO Lloyd Blankfein has agreed to testify for the U.S. government at the upcoming criminal trial of Galleon hedge fund founder Raj Rajaratnam, the WSJ reported, citing people familiar with the matter.
Prosecutors have charged the Sri Lankan-born Rajaratnam, 53, with 14 counts of securities fraud and conspiracy. Over the last 18 months federal prosecutors in Manhattan, who allege Mr. Rajaratnam was at the center of an insider-trading ring that generated more than $20 million in profit from 2006 to 2009 in improper trades, have charged 46 people with insider trading in the Galleon case; of those, 29 have pleaded guilty. The long-running case took a new turn two days ago when the SEC charged former Goldman and Procter & Gamble (PG) director Rajat Gupta with providing inside information to Rajaratnam about the two companies’ earnings as well as word of Warren Buffett’s Berkshire Heathaway (BRKA) $5 billion investment in Goldman Sachs in fiscal 2008. Gupta called the charges baseless, insisting he did nothing wrong and didn’t trade in or profit from Goldman shares.
The U.S. government would use Blankfein, Wall Street’s best-known executive, to establish evidence linking information about Goldman that was shared among board members and execs with Gupta, the Journal said.
Blankfein’s testimony would be used as a bridge establishing the origin of the tip allegedly provided by Gupta to Rajaratnam, who the government says traded on the information, the paper said.
Rajaratnam was arrested on Oct. 16, 2009, at his Manhattan home and charged by the U.S. Justice Department and the the Securities and Exchange Commission with running the biggest insider trading scheme involving a hedge fund.
The criminal trial of Mr. Rajaratnam, who is free on $100 million bail, is scheduled to start on March 8 in Manhattan federal court.
Neither Goldman nor Mr. Blankfein, notes the Journal, has been accused of wrongdoing in the case.