Goldman Director Gave Tip on Buffett Deal, WSJ Says (Update1)
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By Chris Peterson
April 23 (Bloomberg) -- A Goldman Sachs Group Inc. director tipped off a hedge fund billionaire about a $5 billion investment in the bank by Warren Buffett’s Berkshire Hathaway Inc. before it became public knowledge, the Wall Street Journal reported, citing a person familiar with the matter.
Goldman Sachs director Rajat Gupta told Galleon Group founder Raj Rajaratnam about the Berkshire investment, the newspaper quoted the source as saying. Federal investigators wrote to Gupta to say they had intercepted phone calls between Gupta and Rajaratnam, the report quoted the source as saying.
Goldman Sachs spokeswoman Connie Ling in Hong Kong declined to comment on the report when contacted by Bloomberg News. Gupta said last month he was stepping down as a Goldman Sachs director.
The bank, the most profitable in Wall Street’s history, in September 2008 agreed to sell $5 billion in preferred shares that paid 10 percent interest to Buffett, after the Lehman Brothers Holdings Inc. bankruptcy and Bank of America Corp.’s purchase of Merrill Lynch & Co. Buffett remains comfortable with his Goldman investment after regulators on April 16 sued the bank for fraud, Berkshire Director Thomas Murphy said.
Rajaratnam is being sued by the U.S. Securities and Exchange Commission for insider trading, which he denies. Gupta hasn’t been formally accused of any wrongdoing, the newspaper said, adding that his lawyer said he hadn’t violated any law.
Gupta, 61, is being examined by the SEC, which sued Rajaratnam, a person familiar with the Galleon investigation who asked not to be identified because the matter is ongoing and confidential, has told Bloomberg.
Goldman Support
Buffett has supported a firm that’s become a lightning rod for politicians and people who feel cheated by the recession. Public regard for Goldman Sachs has plummeted in the year and a half since Buffett provided the company with capital in the depths of the financial crisis.
Buffett is “not concerned with the investment at all,” Murphy said in a Bloomberg Television interview, citing a phone conversation with Buffett, Berkshire’s chief executive officer. “He has to see what’s going to happen on it, but I think he has great confidence in Goldman,” Murphy said.
The SEC accused Goldman Sachs and an employee of misleading clients on the sale of mortgage-related investments. The case focuses on a collateralized debt obligation that yielded a $1 billion payout for hedge fund Paulson & Co. when the CDO lost value.
Investor Gathering
Buffett and Murphy spoke after the SEC announced its lawsuit on April 16, the director said.
Goldman Sachs, led by Chief Executive Officer Lloyd Blankfein, has called the claims in the lawsuit unfounded. Investors who took the opposite position to Paulson were aware of the risk, Goldman Sachs has said.
Buffett may be called on to address criticism of Goldman Sachs on May 1 when tens of thousands of investors gather in Omaha, Nebraska, for Berkshire’s annual meeting. At last year’s meeting, he countered public anger over the taxpayer-funded bank bailouts by touting Wells Fargo & Co., one of Berkshire’s top holdings and the recipient of $25 billion in aid.
For Related News and Information: More on Buffett: BIO WARREN BUFFETT <GO> Top Goldman Sachs news: GS US <Equity> TCNI MOSTREAD <GO> Buffett-related video: BRK/A US <Equity> TCNI AV <GO> Top financial news: FTOP <GO>
Last Updated: April 23, 2010 01:58 EDT
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Chris Peterson
April 23 (Bloomberg) -- A Goldman Sachs Group Inc. director tipped off a hedge fund billionaire about a $5 billion investment in the bank by Warren Buffett’s Berkshire Hathaway Inc. before it became public knowledge, the Wall Street Journal reported, citing a person familiar with the matter.
Goldman Sachs director Rajat Gupta told Galleon Group founder Raj Rajaratnam about the Berkshire investment, the newspaper quoted the source as saying. Federal investigators wrote to Gupta to say they had intercepted phone calls between Gupta and Rajaratnam, the report quoted the source as saying.
Goldman Sachs spokeswoman Connie Ling in Hong Kong declined to comment on the report when contacted by Bloomberg News. Gupta said last month he was stepping down as a Goldman Sachs director.
The bank, the most profitable in Wall Street’s history, in September 2008 agreed to sell $5 billion in preferred shares that paid 10 percent interest to Buffett, after the Lehman Brothers Holdings Inc. bankruptcy and Bank of America Corp.’s purchase of Merrill Lynch & Co. Buffett remains comfortable with his Goldman investment after regulators on April 16 sued the bank for fraud, Berkshire Director Thomas Murphy said.
Rajaratnam is being sued by the U.S. Securities and Exchange Commission for insider trading, which he denies. Gupta hasn’t been formally accused of any wrongdoing, the newspaper said, adding that his lawyer said he hadn’t violated any law.
Gupta, 61, is being examined by the SEC, which sued Rajaratnam, a person familiar with the Galleon investigation who asked not to be identified because the matter is ongoing and confidential, has told Bloomberg.
Goldman Support
Buffett has supported a firm that’s become a lightning rod for politicians and people who feel cheated by the recession. Public regard for Goldman Sachs has plummeted in the year and a half since Buffett provided the company with capital in the depths of the financial crisis.
Buffett is “not concerned with the investment at all,” Murphy said in a Bloomberg Television interview, citing a phone conversation with Buffett, Berkshire’s chief executive officer. “He has to see what’s going to happen on it, but I think he has great confidence in Goldman,” Murphy said.
The SEC accused Goldman Sachs and an employee of misleading clients on the sale of mortgage-related investments. The case focuses on a collateralized debt obligation that yielded a $1 billion payout for hedge fund Paulson & Co. when the CDO lost value.
Investor Gathering
Buffett and Murphy spoke after the SEC announced its lawsuit on April 16, the director said.
Goldman Sachs, led by Chief Executive Officer Lloyd Blankfein, has called the claims in the lawsuit unfounded. Investors who took the opposite position to Paulson were aware of the risk, Goldman Sachs has said.
Buffett may be called on to address criticism of Goldman Sachs on May 1 when tens of thousands of investors gather in Omaha, Nebraska, for Berkshire’s annual meeting. At last year’s meeting, he countered public anger over the taxpayer-funded bank bailouts by touting Wells Fargo & Co., one of Berkshire’s top holdings and the recipient of $25 billion in aid.
For Related News and Information: More on Buffett: BIO WARREN BUFFETT <GO> Top Goldman Sachs news: GS US <Equity> TCNI MOSTREAD <GO> Buffett-related video: BRK/A US <Equity> TCNI AV <GO> Top financial news: FTOP <GO>
Last Updated: April 23, 2010 01:58 EDT
