Goldman Sachs chief executive Lloyd Blankfein testified Thursday that he routinely shared confidential profit-and-loss figures with the banking giant's board members _ valuable information that prosecutors allege one board member used in an insider trading scheme.
Blankfein said profit-and-loss numbers were kept under wraps until formal announcements of quarterly results because it was potentially "market moving information."
"I would always give them an estimate of where the P&L was at the time and a projection of where it was trending," Blankein said in federal court in Manhattan, where he is the star witness against former Goldman board member Rajat Gupta.
Some of the allegations against Gupta stem from an October 2008 Goldman board meeting where members were told that the investment bank was facing a quarterly loss for the first time since it had gone public in 1999. Prosecutors allege that Gupta called his friend and hedge fund titan Raj Rajaratnam moments after the meeting ended, causing Rajaratnam to sell his entire position in Goldman the next morning and save millions of dollars.
Assistant U.S. Attorney Reed Brodsky asked Blankfein if he had ever authorized Gupta to discuss confidential information with "an outsider."
"No," Blankfein said.
It was Blankfein's second day on the witness stand at the closely-watched white collar trial. On Monday, he testified that he was forcing Gupta off the board because of a conflict of interest when the economic crisis caused him to ask him to stay on during a time the government claims he divulged secrets illegally.
Blankfein told the jury that a press release had been prepared to announce Gupta's departure from the board when "events intervened" _ an understated reference to the collapse of the financial markets in September 2008.
"As a result of that, I asked Rajat at that point to withdraw his resignation and stay on the board," Blankfein said.
Gupta, 63, was leaving the board reluctantly only because Blankfein concluded it would be a conflict of interest for him to remain with Goldman since he was planning to begin advising a large private equity firm, Blankfein testified.
Blankfein said he changed his mind because he did not believe either company would be pulling off the kind of deals that would create a conflict in the middle of an economic crisis and because he thought it would be misunderstood in the marketplace if a board member were to leave during such dire times.
Prosecutors say Blankfein's decision to keep Gupta on the board left him in place to disclose both the 2008 losses and another major announcement that earned Rajaratnam nearly $1 million in illegal profits: a $5 billion investment from Warren Buffett's Berkshire Hathaway.
Rajaratnam was convicted last year at trial and is serving an 11-year prison sentence.
Blankfein was to return to court on Friday for cross-examination.
Associated Press writer Larry Neumeister contributed to this report.