The decision by Raj Gupta’s lawyers to call senior Goldman staffers as part of his conspiracy defence is causing some concern in Blankfein’s corridors.
The fact that Goldman Sachs President Gary Cohn may be questioned by lawyers defending acccused fraudster Rajat Gupta has set a few headless hares running in the Goldman jungle. Cohn’s managing director David Loeb was also fingered by lawyers as a bloke they’d like to examine under oath. Gupta is a close friend and business associate of Galleon Group LLC co-founder Raj Rajaratnamhas.
Rajaratnamhas was sentenced last month to 11 years in prison and fined $10 million, after being found guilty on 14 counts of fraud and conspiracy. This sort of thing being of course only a small minority of what the generally fine and upstanding folks on Wall St do, all 21 defendants from a variety of firms (named as associated with the case) were also found guilty. Now Raj’s pal Rajat Gupta has been charged to. Gupta is a former senior officer of…..Goldman Sachs. Hold that thought.
n October 26th, Rajat Gupta was charge on six counts of conspiracy and fraud. Among the illegal tips that Mr. Gupta is accused of passing to Mr. Rajaratnam was advance news of Warren E. Buffett’s $5 billion investment in Goldman Sachs in 2008. That’s not so much a tip as the whole bill.
Now, all of a sudden, Gupta’s lawyers have introduced the names of Cohn and Loeb. Having senior executives charged with nefarious activities is no big deal for Goldman, as it happens pretty much on a weekly basis. As of last week, the firm and a dozen or more of its senior officers were involved in defending over 40 charges of misrepresentation and fraud. The difference in this case is that Gupta knows where quite a few bodies are buried….and has singled out the inimitable Gary Cohn.
I must stress: this isn’t the SEC or the Feds requesting that Cohn and Loeb testify: it’s the defendant’s legal team doing so at their client’s specific request.
Gupta is a very heavy hitter. He ran McKinsey for over 30 years, and until all this stuff hit the fan was a non-exec on several top Dow 100 companies. Gary Cohn is infamous as the man who, as senior Greek politicians continued to defraud Brussels in terms of their sovereign balance sheets in 2008, led a team from Goldman Sachs – in Athens – on a pitch to show the pols how to continue doing it in variously ingenious ways.
Goldman had previously proven expertise in this area. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens meet Europe’s deficit rules while continuing to spend beyond its means.
Gupta’s request for courtroom testimony from Cohn is a direct shot across the Goldman President’s bows. During that same busy year of 2008, Gupta’s former associate Raj Rajaratnamhas had the odd very long lunch with both Cohn and Loeb….during which they discussed major bank takeovers, the TARP programme, and several other fripperies of the day.
The Feds have never bottomed out the question of Government Securities purchases at the time TARP was passed….and how Raj Rajaratnamhas got to know enough to buy a whole chunk of bank stocks at rock-bottom prices. And of course, Brussels would love to get some solid testimony on the Cohn ‘how to hide the debt’ seminars in Athens. The Sprouts have been a tad distracted for the last ten months, but I’m sure they could make time for this one.
My guess here is that there will be a flurry of untaped meetings behind the scenes, at which Rajat Gupta will variously weigh up the pros and cons of turning State’s evidence and/or persuading Goldman’s bigwigs that they should give him a whole lot of help in the case. If the former should be the case (and it would probably be his best option) then I suspect this is one outbreak of smelly wind Goldman Sachs will not easily waft away.
The Slog 