Lloyd Blankfein’s testimony at the trial of Raj Rajaratnam Wednesday was a love note to Warren Buffett.
The prosecution accusing Rajaratnam of insider trading was asking Blankfein questions yesterday to ascertain whether the information a Goldman board member leaked to Raj was inside information.
Rajat Gupta, the board member, told Raj the highly confidential fact that Goldman Sachs was about to announce a $5 billion investment from Warren Buffett at the height of the crisis, when confidence in the firm was at its lowest.
As the government’s witness, Blankfein’s job was to tell the courtroom that Gupta should not have leaked the information to Raj. He couldn’t testify that the information was “material and nonpublic,” which is the most important question of the trial, but he did say that there was a big difference between speculation and what the board knew.
And just minutes after the board knew that Buffett would invest, Raj knew.
So to explain why it was a big deal for Gupta to leak that kind of information, Blankfein went on and on about how awesome Buffett is.
“Apart from [being the the Chairman and CEO of Berkshire Hathaway], he has a reputation as a very shrewd and successful investor,” said Blankfein.
Warren Buffett works like a powerful love potion on investors, explained Blankfein. So being touched by the money that touched Buffett was guaranteed to make Goldman “more attractive to them.”
Buffett’s $5 billion investment sent a message to the market that “we were that much safer because we had more capital,” said Blankfein, “but also because he was such a prominent investor and presumably, if he had any concerns about us he wouldn’t be investing in us.”
“Anyone thinking that we didn’t have enough capital could think it $5 billion less.”
And in case the court didn’t fully get the significance of an investment from The. Warren. Buffett, Blankfein laid it on thicker.
“An endorsement of a kind from a person whose endorsement is very valued in the world.”