The charge that a Goldman Sachs board member betrayed the firm and the firm’s clients (including Warren Buffett) by passing on confidential information are absolutely devastating for the firm.
If the allegations are true, Rajat Gupta betrayed everything Goldman Sachs purports to stand for — and everything even the junior-most trainee learns the first day on the job.
If you haven’t been paying attention, Gupta, a former Goldman Board member has been charged with revealing insider details about Goldman’s earnings and Buffett’s investment while he was still on the board at Goldman Sachs.
The SEC has accused Gupta of leaking news of Warren Buffett’s investment in Goldman Sachs to the hedge fund Galleon Group, whose CEO has already been charged with insider trading. In April last year, the SEC announced that it was investigating Gupta, but it was not yet known about which companies he might have leaked inside information.
Still, as they stand now, the charges are deeply embarrassing for the firm. Confidentiality is crucial for everything the firm does, and it is the first duty Goldman owes its clients. And the idea that a board member–one of the senior-most executives at the firm–would so blatantly betray this trust should shake the firm to the core.
Of course, for now, the charges are just allegations, and Gupta is denying them. Goldman hasn’t commented. All we know for sure is that the SEC says it has records of calls Gupta made to Raj moments after he spoke to Blankfein about material information.