At Gupta trial, a glimpse of Goldman's workings

Wall Street watchers hoped that the inner workings of Goldman Sachs would be on display during the insider trading trial of Rajat K Gupta, which begins closing arguments on Wednesday.

The monthlong trial of Gupta, a former Goldman board member, did deliver on its promise to shed light on how Goldman conducted its business. Several top Goldman officials appeared, including Lloyd C Blankfein, the chief executive; Stephen R Pierce, head of the bank’s capital markets group; and Byron D Trott, a former senior Goldman executive and Warren E Buffett’s go-to investment banker.

Much of their testimony was about the secrecy of Goldman’s September 2008 capital-raising effort, which Gupta is accused of leaking to the convicted hedge fund manager Raj Rajaratnam.

 

One of the most illuminating pieces of Goldman-related evidence was among the very last exhibits that the defence introduced before it rested its case on Tuesday. During the testimony of James Roth, a junior Goldman executive, Gupta’s lawyers showed the jury an internal Goldman document from July 2008.

The document was compiled by Roth for Gary D Cohn, then the bank’s co-president, in preparation for a meeting he had scheduled with Rajaratnam, former head of the Galleon Group hedge fund, on July 31, 2008. (By the end of 2009, Rajaratnam had been arrested and Galleon shut down.)

Roth testified that in 2008 he worked in Goldman’s executive office in the client relations group. His job was to prepare briefing documents for the top executives at Goldman, with a particular focus on Cohn, who is now president and chief operating officer. He said that when Cohn was scheduled to meet with a Goldman client, he would “liase” with the area of the bank most responsible for the relationship and assemble as much information as possible. His practice was to deliver these documents to Cohn a week before his meetings so he would be prepared for the client meeting.

In the more than a year that Roth worked in the executive office, he said he had assembled hundreds of briefing documents for Cohn. “That shows you how exciting my life was,” Roth joked.

Today, the thorough three-page document prepared by Roth for the meeting with Rajaratnam reads like an artifact, a snapshot of Galleon when it was a prestigious hedge fund with $8 billion in assets under management. At the top of the first page is a passport-size photo of Rajaratnam. A prominent section of the briefing is “EO interactions,” or executive office interactions, which is compiled from an internal database tracked by the client relations group, Roth said.

“You called Rajaratnam in 2007,” reads one bullet point.

“You saw Rajaratnam at a dinner hosted by Steven Cohen in February 2007,” read another, referring to the hedge fund billionaire who runs SAC Capital.

“You saw Rajaratnam at NYU Child Study Center event in December 2006,” said a third.

Under “talking points/business agenda,” Cohn was instructed to “deliver the message that we want to expand our PB relationship,” which referred to its prime brokerage business. Under potential questions, Cohn was advised to ask “what are you thinking regarding future growth at Galleon?” and “how can we be more helpful?”

At its peak in 2007, Galleon did more than $30 million in business with Goldman, which ranked it about the 90th-largest client in the bank’s equities division, according to Roth’s testimony.

It is unclear why the defence introduced the briefing paper, but presumably its purpose was to underscore for the jury one of Gupta’s main defences: Galleon was such an important client to Goldman that there were other executives at the bank who could have fed Rajaratnam inside tips. “The wrong man is on trial,” Gary P Naftalis, a lawyer for Gupta, said earlier in the case.

Regardless of what the jury makes of the document, it provides a peek inside Goldman’s executive suite as well as its approach to client meetings.

© 2012 The New Tork Times News Service