Goldman Sachs’s Trott tells jury of Buffett deal secrecy

Intel, Apple

“Mr. Loeb, the evidence will show, provided Intel, and Apple and Hewlett Packard information to Mr. Rajaratnam,” Brodsky said, adding that the tips allegedly passed by Loeb were different from those Gupta is accused of leaking. The defense “wants to blow this up and confuse the jury,” Brodsky said in response to Naftalis’s comments about Loeb.

Michael DuVally, a spokesman for Goldman Sachs, declined to comment on the statements about Loeb.

Before that exchange, Trott became the third witness to describe events that preceded Galleon’s purchase of 267,000 shares in Goldman Sachs in the minutes before the stock market closed on Sept. 23, 2008.

Testifying about a “time of turmoil” and “fear” in the markets, Trott told jurors that he twice reached out to Buffett to see whether he’d be willing to invest in Goldman Sachs. Buffett, with whom Trott had a “special relationship,” rejected a first overture but was receptive to a renewed request on Sept. 22 of that year, he said.

Seal of Approval

The second proposal had terms closer to Buffett’s liking, including $5 billion in preferred stock carrying a 10 percent interest rate and the right to buy common shares of stock in a new public offering. Buffett also insisted that top Goldman Sachs executives not sell their own shares.

“Was this discussion confidential?” Brodsky asked.

“Very,” said Trott, who was based out of Chicago and working out of New York at the time. Trott said that winning Buffett’s investment was “like getting the Good Housekeeping seal of approval.”

They hammered out the deal in a 20-minute telephone call on Sept. 23 in which Trott said he wanted Buffett to be the “cornerstone” of the transaction. After they reached a tentative agreement, Buffett told Trott not to telephone until later that afternoon because he had an important appointment.

“He told me he promised his grandkids to take them to Dairy Queen, and he was not to be interrupted,” Trott said.

Berkshire CFO

Goldman Sachs executives including Chief Executive Officer Lloyd Blankfein and Chief Financial Officer David Viniar signed off on the deal, and then took it to the full board of directors at 3:15 p.m. that day, Trott said. The board, including Gupta, met by telephone, he said.

“The impact on Goldman Sachs was market-moving,” he said. “The markets were in chaos.”

Trott said he spoke to Buffett after the deal was approved, and Buffett asked him to brief Berkshire’s CFO, Mark Hamburg, with the details.

“Warren had alerted him that I’d be calling him about a deal he’d agreed to,” Trott said, laughing and turning to explain to the jury. “Mark Hamburg didn’t know the details until well after the close of the market.”

Rajaratnam, by contrast, knew of the investment before the market closed, prosecutors allege.

Earlier today, a former Galleon trader, Ananth Muniyappa, testified that a partner at the hedge fund, Leon Shaulov, was angry that he didn’t get a chance to buy shares of Goldman Sachs on Sept. 23, 2008. Andrew Levander, a lawyer for Shaulov, who isn’t accused of wrongdoing, didn’t immediately return a call.

The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).

Bloomberg News

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments
comments powered by Disqus