• 01 Mar 2011 at 12:59 PM

Goldman Sachs Board Member Couldn’t Wait A Single Second To Pass Insider Information To Raj Rajaratnam

By

Okay, that’s not entirely fair. Rajat Gupt actually did wait a second– all 23 of them– to call Rajaratnam after an informative chat with Lloyd Blankfein.

Blankfein began to appreciate very early in the quarter that results were going to be poor. About mid-quarter, on October 23, 2008 at 4:15 p.m., Blankfein, Goldman Sachs Chief Financial Officer David Viniar (“Viniar”), and other senior executives at Goldman Sachs conducted a Board posting call during which they informed the Board of the company’s then-current financial situation. The daily and weekly profit and loss statements that Blankfein and Viniar would typically rely on as the basis for their presentations to the Board show that the company was then operating at a quarter to date loss of $1.96 per share at the time.

Gupta dialed into the October 23, 2008, Board meeting around the time it was scheduled to start and remained on the call until 4:49 p.m. Just 23 seconds after disconnecting from the call, Gupta called Rajaratnam. The call lasted approximately 13 minutes. The following morning, just as the financial markets opened at 9:30 a.m., Rajaratnam caused the Galleon Tech funds to begin selling their holdings of Goldman Sachs stock. The funds finished selling off their holdings — which had consisted of over 120,000 shares — that same day at prices ranging from $97.74 to $102.17 per share. The same day (October 24, 2008), in discussing trading and market information with another participant in the trading scheme, Rajaratnam explained that Wall Street expects Goldman Sachs to earn $2.50 per share but that Rajaratnam had heard the prior day from a member of the Goldman Sachs Board that the company was actually going to lose $2 per share. As a result of Rajaratnam’s trades based on the material nonpublic information that Gupta provided, the Galleon Tech funds avoided losses of over $3 million.

Rajat Gupta Complaint [SEC via Business Insider]

Comments (70)

  1. 1
    Posted by BackOfficeSales | March 1, 2011 at 6:23 PM

    Pssst! Raj! a ertaincay inancialfay ompanycay isay otnay oinggay otay eetmay pectatinsexcay, umpday! umpday! umpday!

  2. 2
    Posted by BackOfficeSales | March 1, 2011 at 6:23 PM

    Pssst! Raj! a ertaincay inancialfay ompanycay isay otnay oinggay otay eetmay pectatinsexcay, umpday! umpday! umpday!

  3. 3
    Posted by Mike Cooper | March 1, 2011 at 6:42 PM

    Hubris, to think such an obvious tip would go unnoticed? Or, perhaps, simply proof that enforcement is so weak, only truly extraordinary cases are every pursued.

  4. 4
    Posted by Non | March 1, 2011 at 6:56 PM

    Criminals always expect to get away with it. For any individual act this expectation may be rational. Criminals often continue their crimes, increasing their risk, and making their decision to continue their criminal conduct irrational.

  5. 5
    Posted by SEC watchdog | March 1, 2011 at 7:01 PM

    Wow, you mean certain members of Goldman Sachs trade on inside information?

    Cough cough Prop Desk cough

  6. 6
    Posted by God | March 1, 2011 at 7:06 PM

    Insider trading is legal in sri lanka.

  7. 7
    Posted by small investor | March 1, 2011 at 7:13 PM

    It seems to be legal in the US for the past 10 years at least

  8. 8
    Posted by small investor | March 1, 2011 at 7:13 PM

    It seems to be legal in the US for the past 10 years at least

  9. 9
    Posted by small investor | March 1, 2011 at 7:13 PM

    It seems to be legal in the US for the past 10 years at least

  10. 10
    Posted by Guest | March 1, 2011 at 7:25 PM

    Eh, dude only made $3MM…not even “material”…no need to worry

  11. 11
    Posted by Own set of rules | March 1, 2011 at 7:46 PM

    it is legal if you are a member of congress.

  12. 12
    Posted by Guest | March 1, 2011 at 7:50 PM

    How much did Gupt make? Actually, can they get him for insider trading if he didn’t profit off it and didn’t trade it? What did he do wrong; not say, this is material info you’re not supposed to trade on RajRaj?

  13. 13
    Posted by derp | March 1, 2011 at 7:51 PM

    23 Seconds? That’s pretty long…

    … wait, what are we talking about?

    - Rick Pitino

  14. 14
    Posted by Guest | March 1, 2011 at 8:01 PM

    Look at the definition of insider trading again. Think about it and the answer will come to you.

  15. 15
    Posted by Guest | March 1, 2011 at 8:01 PM

    Look at the definition of insider trading again. Think about it and the answer will come to you.

  16. 16
    Posted by Guest | March 1, 2011 at 8:01 PM

    Look at the definition of insider trading again. Think about it and the answer will come to you.

  17. 17
    Posted by Guest | March 1, 2011 at 8:01 PM

    Look at the definition of insider trading again. Think about it and the answer will come to you.

  18. 18
    Posted by Anonymous | March 1, 2011 at 8:12 PM

    So I’m looking at Rajaratnam right? And I’m thinking, if you move the n to the end of his name and replace it with the m, you’ve go Raj a rat man. How perfect is that?

    guy with too much time on his hands

  19. 19
    Posted by Guest | March 1, 2011 at 8:15 PM

    It is legal if you do not get caught

  20. 20
    Posted by Fellow Caffeine Pill Addict | March 1, 2011 at 8:17 PM

    SBTB reference in the tag?!?! Ms Levin you’ve outdone yourself.

  21. 21
    Posted by Own set of rules | March 1, 2011 at 8:19 PM

    actually no. it is not legal if you don’t get caught, you just get away with it. if you are a member of congress, you are allowed to insider trade. quite a substantial difference.

  22. 22
    Posted by Own set of rules | March 1, 2011 at 8:19 PM

    actually no. it is not legal if you don’t get caught, you just get away with it. if you are a member of congress, you are allowed to insider trade. quite a substantial difference.

  23. 23
    Posted by Christofurio | March 1, 2011 at 8:21 PM

    23 seconds? Takes me about thatamount of time to find which pocket my phone is in, too.

  24. 24
    Posted by Christofurio | March 1, 2011 at 8:21 PM

    23 seconds? Takes me about thatamount of time to find which pocket my phone is in, too.

  25. 25
    Posted by FinkNottle | March 1, 2011 at 8:30 PM

    Bro…xtube or pornhub? Which is better?

  26. 26
    Posted by FinkNottle | March 1, 2011 at 8:30 PM

    Bro…xtube or pornhub? Which is better?

  27. 27
    Posted by Guest | March 1, 2011 at 8:33 PM

    Wow this is bad. They nab this guy for “passing on information” regarding the Buffett Goldman investment yet they don’t arrest Steven Friedman who was insider trading on it?! Cleary there are two sets of punishment. This looks so bad.

  28. 28
    Posted by Guest | March 1, 2011 at 8:33 PM

    Wow this is bad. They nab this guy for “passing on information” regarding the Buffett Goldman investment yet they don’t arrest Steven Friedman who was insider trading on it?! Cleary there are two sets of punishment. This looks so bad.

  29. 29
    Posted by Pat B. | March 1, 2011 at 8:41 PM

    Come on, Bryce. There are a lot more important problems than *Sri Lanka* to worry about.

  30. 30
    Posted by Guest | March 1, 2011 at 8:47 PM

    Here is one for you then: http://www.sarcasmsociety.com/sarcasm/howtobesarcastic

  31. 31
    Posted by Dean Wormer | March 1, 2011 at 8:47 PM

    Thanks for confirming that you work in nothing even remotely related to finance. Fat, drunk, and stupid is no way to go through life, son.

  32. 32
    Posted by Guest | March 1, 2011 at 8:48 PM

    Why didn’t he short it?

  33. 33
    Posted by Guest | March 1, 2011 at 8:48 PM

    Why didn’t he short it?

  34. 34
    Posted by SEC Watchdog | March 1, 2011 at 9:03 PM

    dual monitors

  35. 35
    Posted by Jordan Lizard | March 1, 2011 at 10:41 PM

    If you’re not on the inside, then you’re on the outside.

  36. 36
    Posted by Boris the Opera Lover | March 1, 2011 at 11:25 PM

    In USA Goldman shorts you

  37. 37
    Posted by Garywildd | March 2, 2011 at 12:30 AM

    Haven’t these people heard of secure phones?

  38. 38
    Posted by Garywildd | March 2, 2011 at 12:37 AM

    OK, turn your brain on. Good. So why does it take 13 minutes to say “we’re gonna lose two bucks a share”? If Gupta was in on the scam, he would have said “2 dollar loss” and hung up. The duration indicates that Rajaratnam figured out on his own what was going on from a lengthy conversation on many topics. Did any of you hear the call? J/w

  39. 39
    Posted by Garywildd | March 2, 2011 at 12:37 AM

    OK, turn your brain on. Good. So why does it take 13 minutes to say “we’re gonna lose two bucks a share”? If Gupta was in on the scam, he would have said “2 dollar loss” and hung up. The duration indicates that Rajaratnam figured out on his own what was going on from a lengthy conversation on many topics. Did any of you hear the call? J/w

  40. 40
    Posted by Finn Alexander | March 2, 2011 at 1:51 AM

    I know right?

    -Adam West

  41. 41
    Posted by Speakerphone | March 2, 2011 at 7:18 AM

    Why doesn’t the SEC host a conference call so the sell side can ask puff ball questions like
    “How much of the 3 million gain in Raj’s fund did Gupta own?”
    “Is Buffett buying a 10% preferred “good” news?”
    “Doing a secondary near a 5 year low in the stock…scienter would be on the short side…”

    guy who listens to alot of conference calls

  42. 42
    Posted by Guest | March 2, 2011 at 12:08 PM

    Patrick. How thought-provoking

    - Luis C.

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