A Goldman Sachs director disclosed to Raj Rajaratnam in 2008 that the investment bank was weighing an acquisition of either Wachovia or American International Group, according to a wiretapped telephone conversation that was played in the court.
Rajaratnam, co-founder of the hedge fund Galleon Group, is on trial in Federal District Court in Manhattan on insider trading charges. On Tuesday, a defence lawyer began his cross-examination of a main government witness who has pleaded guilty to passing illegal stock tips to Rajaratnam.
But the most striking testimony came on Tuesday when prosecutors played a recording of a July 25, 2008, call between Rajaratnam and Rajat Gupta, then a Goldman director.
Rajaratnam, working from his Greenwich, Connecticut, home that day, told Gupta that he was meeting with Gary D Cohn, the president of Goldman, later in the week. He asked Gupta about a rumour that Goldman might look to buy a commercial bank.
?This was a big discussion at a board meeting,? Gupta said. He explained that the Goldman board was divided over whether buying a commercial bank made sense because it was a low-return business.
Goldman was bearish on commercial banks, he said, but the board was ?opportunistic? and if Wachovia ?was a good deal they?d go and buy Wachovia.?
Gupta also said that the board was weighing the acquisition of an insurance business, including AIG ?Yes, AIG was in the discussion mix,? he said.
The detailed discussion of Goldman?s board meeting is the first time the government has disclosed specific comments made by Gupta to Rajaratnam about the bank?s internal dealings while a director.
The exchange also reveals the thinking of Goldman?s board at a time when the bank was struggling as the financial crisis grew. A Goldman spokesman declined to comment.