Raj defence Suggests Insider Information Wasn't Material Because Goldman's COO Could Have Talked About It With A "Tier 1" Client

Gary Cohn

Gary Cohn visited the offices of Galleon on July 31 2008, according to files released during the trial of Raj Rajaratnam for insider trading.

The Goldman COO’s visit to the offices of Galleon was just two days after Rajat Gupta was heard on the phone discussing a board discussion about the possibility of Goldman’s buying of AIG or Wachovia.

What the defence is trying to establish is that the discussion along these lines is legitimate for a “Tier 1” client, and that it was a standard inquiry in advance of this meeting

“We rank clients,” explained Blankfein, based on who’s “more important or less important.”

“I’m not entirely sure what ‘Tier 1’ means myself,” said Blankfein, “but I know that we rank clients.”

defence attorney John Dowd asked Blankfein if he spoke to such important clients and kept them informed. 

Of course they do, and in fact Blankfein visited the offices of Galleon “a long time ago,” when he was a Senior Vice President at the firm.

How the testimony helps the defence’s case is this: The prosecution is trying to prove that the information that Gupta passed on to Raj was material nonpublic information. The defence suggests that it’s only “confidential,” information because it was discussed in the meeting, and not material nonpublic because 1) at least one news article reported on the rumour of Goldman’s buying Wachovia and 2) Cohn might have discussed the report with Galleon during or even before visiting the Galleon offices.

“And you’re not suggesting Gary Cohn did anything wrong, are you?”

“No,” said Blankfein.

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