Lloyd Blankfein, the chief executive of Goldman Sachs Group Inc., checks the company's profit daily, prefers voice mail to e-mail and makes unscheduled calls to directors at times of market "uncertainty."
Blankfein's testimony at the insider trading trial of Raj Rajaratnam, founder of the Galleon Group, was intended by prosecutors to show how former Goldman director, Rajat Gupta, passed on information he learned from the board.
During Blankfein's testimony Wednesday before a packed Manhattan federal courtroom, prosecutors painted a picture of a CEO who grew up in an outer borough of New York to eventually run the fifth-biggest U.S. bank by assets.
Assistant U.S. Attorney Andrew Michaelson explored Blankfein's management style. Blankfein, responding in a deferential fashion, said he checks the firm's profit and loss daily, and relies mainly on voice mail. In times of market stress, Blankfein said he likes to have one-on-one conversations with directors. An e-mail shown to jurors referred to such talks as "just-checking-in calls."
Blankfein's reading habits were explored. Rajaratnam's defense lawyer, John Dowd, asked whether Blankfein read the Wall Street Journal daily. "Sometimes I do," he testified, before hurriedly adding, "Often I do, but not always."
Most of his testimony dealt with conversations with Gupta. Blankfein said he briefed his board on Goldman's losses in October 2008, the first losses ever, and the $5 billion investment in the company by Warren Buffett's Berkshire Hathaway Inc. at about the same time. "Was it big news or small news for Goldman Sachs?" Michaelson asked. "Big news," Blankfein replied. "Was the news confidential?" the prosecutor asked. "Yes," the CEO said.
Two dozen reporters scribbled as the he testified, with an equal number of audience members watching. Prosecutors contend Gupta, who has not been charged with a crime and has denied any wrongdoing, related board discussions to Rajaratnam, who then allegedly traded on them.
Rajaratnam is the central figure in the largest crackdown on hedge-fund insider trading in U.S. history. He is accused of making $45 million from tips leaked by corporate insiders. He denies wrongdoing, saying he based trades on research.
Along with Goldman's outside lawyer Karen Seymour and other company attorneys, also in attendance was Manhattan U.S. Attorney Preet Bharara and the chief of his securities fraud bureau, Christopher Garcia.
Blankfein rarely looked at the Rajaratnam, even when testifying that he visited Galleon "a long time ago" when he was Goldman's vice chairman. Under questioning by Dowd, he confirmed Galleon was an important client and that Goldman ranks its clients based on "who's relatively more important and less important." The CEO said he was "not sure" if Galleon was considered a "tier one" client.
Blankfein at times hesitated slightly. Asked about Goldman's performance in October 2008, amid what he said was the great "uncertainty" of the credit crisis, he responded haltingly. "We were losing — er, we were losing money," he said. "We generally made money."
Blankfein also shared his view of Goldman's function. Asked about the company's market-making business, Blankfein said, "We're like a middleman."
"It's a service we do for the world," Blankfein testified. He then changed the last two words to "our clients."
