Lloyd Blankfein, chief executive of Goldman Sachs, took the stand Wednesday morning - the most high-profile and most anticipated government witness in the insider-trading trial of Galleon's Raj Rajaratnam.  Prosecutors asked Mr. Blankfein whether Rajat Gupta, a former Goldman director, violated the bank’s confidentiality policy when he spoke with Mr. Rajaratnam during a secretly recorded phone conversation in July of 2008.  His response:  "Ah … yes."

Before playing the call between Mr. Gupta and Mr. Rajaratnam, prosecutors had Mr. Blankfein walk jurors through a Goldman Sachs 101 course.  He described for them the company’s various businesses, his role as chief executive and even the definition of P.&L. (profit and loss, which Mr. Blankfein checks almost every day).

Mr. Blankfein told jurors he grew up in Brooklyn and attended Thomas Jefferson High School there. Left unmentioned was that he also attended Harvard University for his undergraduate and law degrees.

The government played for the second time segments of a July 29, 2008, call between Mr. Gupta and Mr. Rajaratnam. The two men are heard on a recording of that conversation going over strategy discussions during a Goldman Sachs board meeting.

During the call, Mr. Rajaratnam asked him about a rumor that Goldman “might look to buy a commercial bank,” like Wachovia.

“Yeah. This was a big discussion at the board meeting,” Mr. Gupta said. “And you know it was a uh, divided discussion in the board.”

At different points, the prosecutor, Andrew Michaelson, stopped the tape to ask Mr. Blankfein whether the subject matter of the call was indeed discussed at the board meeting and whether the content confidential.

For the most part, Mr. Blankfein responded with one-word answers, typically “yes.”
Azam Ahmed and Guilbert Gates/The New York Times Click on the above graphic to get a visual overview of the Galleon information network

As he listened to the recording, Mr. Blankfein alternated between leaning back in his seat and hunching forward with his fist pressed against his mouth. When asked whether Mr. Gupta had violated his agreement with Goldman Sachs as a board member, Mr. Blankfein replied: “My sense of it, yes.”

Generally speaking, Mr. Blankfein said that communications with respect to Goldman among board members were meant to be confidential.

Mr. Gupta has been accused by the SEC of passing insider information about Goldman to Mr. Rajaratnam, including advance word of the bank’s earnings and a tip during the financial crisis that Warren E. Buffett would invest $5 billion in the bank.

For the complete account, go to:   [Dealbook, 3/23, "At Galleon Trial..."]