March 24, 2023

DealBook: Detail by Detail, Gupta’s Lawyer Deconstructs Goldman Testimony

It had to have been among the least productive weeks of Lloyd C. Blankfein’s six-year tenure as the chief executive of Goldman Sachs.

For the better part of three days this week, Mr. Blankfein testified at the trial of Rajat K. Gupta, the former Goldman director who is facing charges that he leaked the bank’s secret boardroom discussions to the hedge fund manager Raj Rajaratnam from 2007 to 2009.

Though Mr. Blankfein appeared at ease in the courtroom, he had to clear his busy calendar. He could not monitor the volatility in the financial markets. He could not even check his BlackBerry, to which he has acknowledged something of an addiction. In short, he could not do his job.

Instead, Mr. Blankfein, who has spent most of his career in the fast-paced environment of a trading floor, had to sit still on the witness stand and respond to hours of often-monotonous questions. Lawyers on both sides had him discuss Goldman’s inner workings, from the contents of board meetings to his relationship with his lieutenants.

Goldman has played a starring role in the trial of Mr. Gupta, which wrapped up its third week in Federal District Court in Manhattan before Judge Jed S. Rakoff. The prosecution rested its case on Friday, and the defense began to put on its own witnesses.

Late Friday, after the jury had gone home for the weekend, Gary P. Naftalis, a lawyer for Mr. Gupta, said it was “highly likely” that Mr. Gupta would testify in his own defense next week.

Mr. Naftalis spent much of Friday cross-examining Mr. Blankfein to try to show that some of the information Mr. Gupta is accused of leaking was known by the market and thus not “material nonpublic information” under the insider trading laws.

The line between public and private information is critical in the case, and Mr. Naftalis worked hard to try to erase that line. He showed Mr. Blankfein two reports from analysts who followed Goldman during the 2008 financial crisis. The reports, written by analysts at Merrill Lynch and Oppenheimer, raise the prospect of Goldman buying a retail bank. Both reports came after meetings with top Goldman officials.

“GS Bank Trust?” pondered one report. “Don’t rule it out.”

A rationale for putting the reports before the jury was to minimize damage from the only phone conversation between the two recorded by a Federal Bureau of Investigation wiretap. During that call, in July 2008, Mr. Gupta tells Mr. Rajaratnam that Goldman’s board is considering buying a bank.

A jury convicted Mr. Rajaratnam, who ran the now-defunct Galleon Group hedge fund, of orchestrating an extensive insider trading conspiracy last year.

At times, Mr. Naftalis and Mr. Blankfein often seemed to fight for the jury’s affection. While Mr. Blankfein was being presented with a batch of news pieces about Goldman’s possible purchase of a bank, an article flashed on the overhead screen with a photograph of Mr. Blankfein resting his face on his left hand. This prompted laughter from the jury and spectators.

Mr. Blankfein, seizing the moment, mimicked the pose from the witness stand, leading to more cackling in the courtroom.

Comparing Mr. Blankfein’s pose against the photograph, Mr. Naftalis instructed the chief executive to move his hand “down and a little to the left.”

As he left the courtroom, Mr. Blankfein acknowledged the jury with a nod and a smile.

Before resting their case on Friday, prosecutors played several secretly recorded short voice mail messages left by Mr. Gupta on Mr. Rajaratnam’s cellphone. During one on Oct. 10, 2008, a time of market turmoil during the financial crisis, Mr. Gupta says: “Hey Raj, Rajat here. Just calling to catch up. I know it must be an awful and busy week. I hope you are holding up well. Uh, and I’ll try to give you a call over the weekend just to catch up. All the best to you, talk to you soon. Bye bye.”

Mr. Gupta’s lawyers have said that by October 2008, Mr. Gupta had lost his entire $10 million in a Galleon fund and had a falling-out with Mr. Rajaratnam and thus had no interest in passing along insider tips. The friendly tone of the voice mail message was the prosecution’s effort to debunk that theory. Reed Brodsky, a prosecutor, rested the government’s case after playing the recordings.

For the last 45 minutes of the day, the jury watched the defense’s videotaped deposition of Ajit Jain, a top lieutenant at Berkshire Hathaway and a top contender to succeed Warren E. Buffett, Berkshire’s chief executive.

Mr. Jain, a friend of Mr. Gupta’s, testified about the acrimony that had developed between Mr. Gupta and Mr. Rajaratnam. He said that during a lunch in January 2009 at an Italian restaurant in Stamford, Conn., Mr. Gupta told him about the bad blood.

“He told me that he had $10 million invested and he had been gypped, swindled and cheated by Raj and had lost his $10 million.”

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The Boss: Stockroom to Boardroom

My father had lost his parents early, and later in life he lost his sight due to macular degeneration, but that never diminished his spirit. After getting his engineering degree, he and my mother moved to Texas, where he worked for a chemical company. They moved back to Atlanta, and he started a laundromat business. He later moved into commercial construction.

I like to say I grew up with Ozzie and Harriet. My mother stayed at home taking care of me and my two older brothers. One became a builder; the other a professor.

At the University of Georgia, my dream was to write for a newspaper and to live in New York City. I majored in public relations, but my senior year a professor told me that though I was an A student, I did not have the talent to succeed in the field.

After graduating, I married my college sweetheart, Mark Miller. Returning from our honeymoon, we realized we had great crystal and china, but no furniture and only $5 to our names. I landed an interview for a job at Jordan Marsh department stores in Florida.

My father-in-law picked me up for the interview from the Miami airport and drove me to the hotel. But when we found that it was an hourly rental, he refused to leave me there. I later found there were two hotels with the same name, and we’d gone to the wrong one.

I was hired and sent to set up trim-a-tree shops at store locations, where I made my share of mistakes. I began to realize that spending my days in stockrooms wasn’t for me. So, 11 months later, we moved to Atlanta, where I found a job at the Atlanta Merchandise Mart as a secretary for a firm representing major household brands.

At 26, I teamed up with another female representative, and we combined our last names to form Judd Miller Company, to represent manufacturers. When we started in 1982, there were almost no women in this business. No bank would lend us money to get started, so we borrowed $15,000 from my father.

We were successful, but I wanted a new challenge. So in 1988, I started a business with a small pottery-making shop. I named it “Mud Pie” because the pottery was painted brown to resemble terra cotta.

Mud Pie soon became a top-selling giftware line for Macy’s. We started with a dozen items, including ducks, rabbits and chicks. In 1991, I acquired my business partner’s share, and five years later was introduced to manufacturing in China, where the factories could make whatever I could dream up. We now design and make more than 4,000 baby, tabletop and fashion gifts.

With my husband as C.F.O., we have grown to 85 employees in the United States and 100 in our overseas office. Last year, we partnered with Lineage Capital, which took a minority stake in Mud Pie, and have begun selling directly to customers through a new Web site.

I suffered a major setback in a 2007 accident, when a dump truck backed up and struck me while I was crossing the street near the Atlanta Merchandise Mart. For a year, my caregiver drove me to work and my husband took me home. Some five surgeries later — including a partial elbow replacement — and with a spinal cord stimulator to ease the pain, I am doing well.

Work was a great impetus to get better, but the accident made me realize that life is short and I needed to accelerate my interest in giving back to the community. So, my husband and I set up a family foundation to help meet urgent needs, like housing and food, of families here and abroad. 

As told to Elizabeth Olson.

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