By Chad Bray
- Lloyd Blankfein
Federal prosecutors in Manhattan prepared Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein in the weeks before he gave testimony in a civil insider-trading case by the Securities and Exchange Commission against former Goldman director Rajat Gupta.
Blankfein was a government witness in the criminal insider-trading case against hedge-fund founder Raj Rajaratnam and is likely to be called as a prosecution witness in Gupta’s insider-trading trial, which is set for May. Rajaratnam was sentenced to 11 years in prison after he was convicted of insider-trading charges last year.
Prosecutors have alleged that Gupta provided inside information to Rajaratnam, a friend and business associate, when Gupta was a board member at Goldman Sachs and Proctor & Gamble Co. The SEC has separated sued Gupta as part of a related, but parallel insider-trading probe.
At a deposition in the SEC case Feb. 24, Blankfein said he met with Assistant U.S. Attorney Reed Brodsky, the lead prosecutor in Gupta’s case, and other government officials before testifying, according to a partial transcript filed in the SEC case Friday. You can read a Reuters story on the deposition here.
He said Brodsky asked “three-quarters” of the questions that day and showed him “10 or 12? documents in preparation for his deposition in the SEC case, according to the deposition transcript. The SEC objected to him answering any questions about what documents were shown to him by prosecutors, asserting privilege, according to the transcript.
Gupta’s lawyers have asked a federal judge to allow them to conduct additional questioning of Blankfein and production of the documents shown to him by prosecutors. They’re also seeking the notes taken by SEC lawyers in connection with joint interview sessions they conducted with prosecutors of potential witnesses in the criminal case.
“There can be no dispute that Mr. Blankfein is a key witness with respect to the allegations against Mr. Gupta,” said Gary Naftalis, Gupta’s lawyer, in court papers. “It is therefore ‘in the interests of justice’ to permit Mr. Gupta to cross-examine using the documents.”
In a separate court filing, the SEC said that Gupta’s lawyers shouldn’t be allowed to conduct additional questioning of Blankfein. The regulator said it urged Gupta’s lawyers to resolve their objection that day, but his lawyers instead chose to use “virtually all of the alloted seven deposition hours on other matters.”
Goldman Sachs declined to comment, as did the U.S. Attorney’s office in Manhattan declined to comment. A lawyer for Blankfein didn’t immediately respond to requests for comment late Friday.