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Lloyd Blankfein, Witness for the Prosecution

June 5, 2012
[ by Melanie Gretchen ] Goldman CEO Lloyd Blankfein has found a new place to hold court: in court.  Testifying in the trial of Rajat Gupta, 63, on Monday, June 4, marked the second time Mr. Blankfein has testified in 15 months in an insider trading case at Federal District Court in Manhattan.  Mr. Gupta has been charged with leaking corporate secrets about the bank to Raj Rajaratnam, the former hedge fund manager and founder of Galleon Group. Round Two. In his testimony last year, Mr. Blankfein testified against Rajaratnam, who was convicted of insider trading and is currently serving 11 years in prison.  This year, Mr. Blankfein's comments were similar, largely relating to an outline of specific Goldman board meetings and the secrecy surrounding the information discussed. To keep the trial rolling – as told by Dealbook writer Peter Lattman, Mr. Blankfein introduced "numerous bone-dry exhibits to the jury, including the minutes and agendas of Goldman board meetings" – Judge Jed Rakoff took the opportunity to entertain the court. After the judge’s deputy swore in Mr. Blankfein, a prosecutor asked him about his life.  Mr. Blankfein, the son of a postal worker, said he was raised in East New York, Brooklyn, and attended Thomas Jefferson High School before graduating from Harvard.  The prosecutor then turned to his career at Goldman, skipping over his stint as a lawyer. Banter. Judge Rakoff seized upon the omission and interrupted the questioning.  "I’m sure you want to hide the fact that the witness is a lawyer," Judge Rakoff told the prosecutor. "Did you go to law school?” he asked the witness. Mr. Blankfein said that he had, and that he had once worked as a corporate tax lawyer for 4 and a half years. "But then you got religion and moved on," said Judge Rakoff, drawing laughter in the courtroom. "It was a mutual decision," said Mr. Blankfein, as he broke into a smile. We know the rest of the story.  Mr. Blankfein, 57, joined a unit of Goldman Sachs, J. Aron, where he sold gold commodities in 1981 and rose through the bank’s fixed income, currency, and commodities unit.  In 2006, he became the firm's CEO after Henry M. Paulson Jr. became Treasury secretary. Media Circus. The people testifying included Gregory Palm, the Goldman's general counsel, and Steven R. Peikin, a lawyer at Sullivan & Cromwell who works with Goldman. Mr. Blankfein was joined at the federal courthouse by Paris Hilton, present as the defendant in a lawsuit brought by a lingerie company. The third Goldman official to testify at Mr. Gupta's trial, Mr. Blankfein follows William George, a Harvard Business School professor and Goldman director, who discussed the confidential nature of the bank’s board meetings.  Stephen Pierce, Goldman’s head of equity capital markets, told the jury about the secrecy surrounding the bank’s attempt to raise $10 billion in September 2008. In addition, Byron Trott, a former senior banker at Goldman who left to start his own firm, testified about the top-secret nature of the $5 billion investment Goldman received from Warren Buffett during the financial crisis.  This included news that Mr. Gupta is accused of feeding to Mr. Rajaratnam before it was announced publicly, joining allegations by prosecutors that Mr. Gupta provided confidential information about Procter & Gamble. Scheduling Conflict. As the government did not finish its direct examination of Mr. Blankfein on Monday, the trial will resume Wednesday, following a long-planned speech that Judge Rakoff is scheduled to give in Washington on Tuesday.  A prosecutor told the judge that Mr. Blankfein hoped to resume his testimony on Thursday after his daughter's high school graduation ceremony on Wednesday. At the end of the day, Judge Rakoff told Mr. Blankfein that he would try to accommodate his schedule but could not guarantee it.  Mr. Blankfein said that it would be hard to get to the courthouse after his daughter’s graduation and a celebratory lunch in Yonkers. "I live in Yonkers so I know," said Judge Rakoff. "I’m going to a restaurant in Yonkers, which you probably know," said Mr. Blankfein. "If it’s the one I’m thinking of, I can’t afford it," Judge Rakoff said. For further details, go to [Dealbook, 6/4/12].