New York: Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc., said former director Rajat Gupta wasn’t authorized to disclose details of board discussions, including talks over whether to acquire an insurer.

Key witness: Lloyd Blankfein, CEO, Goldman Sachs. (Scott Eells/Bloomberg)

Assistant US attorney Reed Brodsky asked Blankfein whether Gupta was permitted to disclose details of board talks at a 28 June 2008 planning session in St Petersburg, Russia, where the board discussed whether to buy a commercial bank or insurer. Blankfein answered, “No."

“You’re not supposed to reveal the confidences of what was discussed in a board meeting," Blankfein said. “Anything that was discussed at the board meeting is a confidential fact."

Gupta, who ran McKinsey and Co. Inc. from 1994 to 2003, is on trial for allegedly leaking tips to Galleon Group Llc. founder Raj Rajaratnam about Goldman Sachs and Procter and Gamble Co., where Gupta was also a director. The alleged Goldman Sachs tips involve earnings in the first quarter of 2007 and fourth quarter of 2008. Another involved a $5 billion (Rs 27,750 crore) Berkshire Hathaway Inc. investment in Goldman Sachs on 23 September 2008.

Gupta is also accused of telling Rajaratnam that Goldman Sachs was considering buying a commercial bank or insurer, American International Group Inc. Earlier in the trial, prosecutors played a 29 July 2008 wiretapped recording of a conversation between the two men in which Gupta details the talks for Rajaratnam. The defense says the information was already public.

Gupta, 63, who has pleaded not guilty, is charged with conspiracy and securities fraud, which carries a maximum 20-year prison sentence. Blankfein, 57, gave similar testimony in Rajaratnam’s insider trading trial on 23 March 2011. Rajaratnam was convicted and is serving an 11-year prison sentence. Rajaratnam and Gupta are the biggest figures caught in a nationwide insider trading probe.

Brodsky began his questioning of Blankfein by asking about the firm’s corporate governance guidelines and its “loyalty and ethics" section. “The proceedings and deliberations of the board and its committees shall be confidential," Blankfein read aloud.

Blankfein told jurors how board meetings are organized, and he recounted his practice of briefing the board regularly.

“My thought was just to make sure they were well-informed and wouldn’t be surprised," Blankfein testified. “I try to stay in touch with my board."

Blankfein also told jurors about the Berkshire Hathaway investment, saying he learned of it after arriving on a midday flight in Washington on 23 September 2008. After speaking to others at his firm, Blankfein said he called Berkshire Hathaway chairman and chief executive officer Warren Buffett, who wanted Blankfein’s agreement to various conditions.

Blankfein briefed his directors on the Buffett investment beginning at 3.15pm, and the board approved the deal, Blankfein said. Prosecutors say within a minute after the board call concluded around 3.55pm, Gupta tipped Rajaratnam about the news. Blankfein said Buffett wanted to resume discussions at 4.15pm about another part of the investment—the price at which he had a right to buy Goldman Sachs stock. “A press release was issued at 5.29pm that evening," Blankfein said.

Brodsky also asked Blankfein about a “board posting call" on 23 October 2008. It was the first time Goldman Sachs would report a loss in the firm’s history as a public company, Blankfein said. “The purpose was to let the board know what our results, that our results were poor to what the world at large was thinking," Blankfein testified. “We were losing money in the quarter. The analysts still had us making money."