Lloyd Blankfein isn’t used to waiting around. But the Goldman Sachs CEO had to exercise more patience than usual on Thursday, when he was called as a witness at the insider-trading trial of Rajat Gupta, a former Goldman board member and ex-head of the consulting giant McKinsey.
The trial, which will enter day thirteen on Friday, has been an interminable morass of phone logs, Bloomberg charts, and procedural nitpicking. Thursday was the second day on the stand for Blankfein, who had to miss Wednesday’s session to attend his daughter’s high-school graduation. On Thursday, he carried a family portrait from the the graduation in his jacket pocket, as if to justify his absence.
Gupta is accused of giving confidential information about the bank to Raj Rajaratnam, the hedge-fund manager who is currently serving eleven years in prison for insider trading. Blankfein confirmed that Goldman board members regularly received information about the bank's quarterly financial results, and that they were not permitted to discuss them with outsiders.
“It’s Good Governance 101 to keep the board informed,” he said.
Hours before Blankfein was called to the stand in mid-afternoon, prosecutors had introduced evidence about a number of calls placed between phones registered to Gupta and Rajaratnam, several of which came mere minutes after Gupta had received confidential information about Goldman’s earnings. Jurors also saw a bevy of charts that showed that Galleon funds had traded large quantities of Goldman’s stock before that information was made public, earning millions of dollars when the news hit.
Dressed in a gray suit, Blankfein was visibly impatient with the trial’s molasseslike pace. During a twenty-minute sidebar, during which lawyers argued in whispers before the judge, Blankfein had no choice but to slouch in his chair and stare ahead silently. ("This is tough for people with ADD," he joked later.)
In 2008, when Lehman Brothers went up in smoke, Gupta was on Goldman’s board, but nearly quit when he was offered an advisory position at the private equity firm KKR. Under cross-examination from Gupta's lawyer, Gary Naftalis, Blankfein said he begged Gupta to reconsider.
“It might have been perceived that he was resigning because of the crisis,” Blankfein said.
So Gupta agreed to stay until 2010, when his term on the Goldman board expired. For his loyalty, Blankfein thanked Gupta in true Goldman style: with a pair of ceremonial cuff links.
Ceremonial cuff links?
“They were cuff links,” Blankfein said snappily.
Late in the afternoon, Naftalis began asking Blankfein about the floor plan of Goldman’s old 85 Broad Street headquarters. Blankfein told the jury that many of the top executives at the firm – people like CFO David Viniar, and then-co-president Gary Cohn – had offices very close to his. Close enough, Naftalis asked him, that he could walk over and talk to any of them when he needed to? Yes, Blankfein replied.
If any of this seems a bit frivolous, keep in mind that the defense’s strategy is not just convincing jurors that Gupta was a Goldman loyalist of unimpeachable honesty who wouldn’t possibly have given Rajaratnam an early tip on the bank’s earnings. It also relies on painting Goldman Sachs as a veritable sieve of market information – a bank full of well-informed gossips, any of whom could have been Rajaratnam’s man on the inside.
Naftalis asked Blankfein how, exactly, he communicated with his lieutenants in the office.
“By instant message?”
At which point, Judge Jed Rakoff decided he'd seen enough.
“When you get down to instant messages, it’s time to quit,” the judge said, adjourning court for the day and ordering Blankfein to come back on Friday to finish his testimony.