Buffett’s Goldman (GS) Deal Being Probed In Galleon Group Insider Trading Case

In the Galleon Group insider trading case, the focus has now turned to Warren Buffett’s Goldman Sachs (NYSE: GS) deal, which came during the peak of the financial crisis. The Wall Street Journal, citing a person close to the situation, has reported that before the public announcement of the deal where Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.A) invested $5 billion in Goldman Sachs Group, a director at the bank tipped off Galleon Group’s Raj Rajaratnam about the deal.

The revelation strengthens the government’s case against Rajaratnam, a hedge-fund titan, accused in the biggest insider trading case in a generation. The government is examining whether Goldman Sachs director, Rajat Gupta, provided inside information to Rajaratnam. On March 22, the government filed a case alleging that Rajaratnam or “co –conspirators” traded on non-public information about the bank. Last week, the government provided more details of the information, which Rajaratnam allegedly received, including an advance notice about Buffett’s transaction with Goldman.

Federal prosecutors say that inside information came from Goldman Sachs’s director Rajat Gupta. Meanwhile, prosecutors have notified Gupta in a letter that they had intercepted a telephonic conversation between him and Rajaratnam. Gupta told to Goldman last month that he won’t seek re-election as a director. However, he has not been charged in the case and denies any wrongdoing in the matter.

Gary Naftalis, Gupta’s lawyer said, “Rajat has neither violated any law nor done anything else improper. He has always conducted himself with integrity in his business, philanthropic and personal life.” Before Buffet invested in Goldman Sachs, the bank’s share had slid more than 40% to $86 by September 23. But on 23 September, when the deal was announced, its shares surged by 45% to $125.