Goldman Sachs’s Trott tells jury of Buffett deal secrecy

Byron Trott, former vice chairman of investment banking at Goldman Sachs (Bloomberg) Byron Trott, former vice chairman of investment banking at Goldman Sachs (Bloomberg)

May 23 (Bloomberg) -- Warren Buffett’s investment in Goldman Sachs Group Inc. in September 2008 was so confidential that even his chief financial officer was unaware of it before being briefed on the details by a Goldman Sachs executive, a witness at the Rajat Gupta trial testified.

Byron Trott, who was vice chairman of investment banking at Goldman Sachs and the architect of the $5 billion investment by Buffett’s Berkshire Hathaway Inc., testified today at Gupta’s insider-trading trial. Prosecutors, who called Trott as a witness, claim that Gupta, then a Goldman Sachs director, tipped Galleon Group LLC co-founder Raj Rajaratnam before the Buffett deal became public on Sept. 23, 2008.

“It was a major, major event to Goldman Sachs and to the markets,” Trott told jurors in Manhattan. “$5 billion was not easily found at that time.”

Prosecutors summoned Trott to tell jurors about the secrecy surrounding a deal that came soon after the collapse of Lehman Brothers Holdings Inc. and while the markets were in free-fall. At the time, Goldman Sachs needed at least $5 billion to “continue to exist,” he said.

“Our entire foundation was built on confidential information, and it could never be breached,” said Trott, who left Goldman Sachs in 2009 after 27 years at the bank. He said he operated on a “need-to-know basis.”

Berkshire CFO

Gupta, who ran the consulting firm McKinsey & Co. from 1994 to 2003, is accused of passing multiple insider tips to Rajaratnam in a conspiracy that ran from 2007 to January 2009. Rajaratnam is serving an 11-year prison sentence for insider trading. Gupta denies wrongdoing.

Prosecutors have said Gupta, 63, leaked inside information to Rajaratnam about New York-based Goldman Sachs and Cincinnati- based Procter & Gamble Co., the world’s largest consumer- products company. Gupta, who was a director at both companies, is charged with conspiracy and securities fraud.

Also today, at a hearing outside the jury’s presence, Assistant U.S. Attorney Reed Brodsky said that another Goldman Sachs executive, David Loeb, was heard on a government wiretap passing information to Rajaratnam.

Brodsky told U.S. District Judge Jed Rakoff that Loeb passed tips about Intel Corp., Apple Inc. and Hewlett-Packard Co. Brodsky made his remarks after defense attorney Gary Naftalis complained that prosecutors withheld evidence about Loeb. Prosecutors denied that allegation. Loeb hasn’t been charged with wrongdoing.

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