01/02/2019 Buffett banker details ‘top secret’ deal | Financial Times

Rajat Gupta
Buffett banker details ‘top secret’ deal
Blow-by-blow account heard in Gupta insider case

Kara Scannell in New York MAY 23, 2012

A former top Goldman Sachs banker testified in an insider trading trial involving a former
Goldman director that Warren Buffett’s $5bn investment in the bank was “about as top secret as
you could get” before it was announced to the public.

Byron Trott, the former Goldman banker then responsible for the relationship with Mr Buffett,
gave a blow-by-blow account of how the bank struck the deal and won board approval in a
matter of hours on September 23, 2008.

His testimony came on the third day of the insider trading case against Rajat Gupta, a former
Goldman director accused of sharing the confidential information, including Mr Buffett’s
investment, with Raj Rajaratnam, founder of Galleon Group.

The Chicago-based Mr Trott said that after learning on September 22 from Goldman’s co-
president that the bank intended to raise money through a stock offering he said he thought it
would be a mistake to do it without a “cornerstone investor.”

He boarded a plane that evening for New York to meet top Goldman executives on the following
Tuesday morning to pitch his idea of approaching Mr Buffett, who had previously turned down
an offer.

During a meeting on the 30th floor of the Goldman headquarters with Jon Winkelreid,
Goldman’s co-president, and David Viniar, the chief financial officer, as well as Lloyd Blankfein,
the chairman, who phoned in from Washington DC, they authorised Mr Trott to approach Mr
Buffett.

Mr Trott took the elevator to an office on the 17th floor which he used when visiting and called
Mr Buffett around 10am, the court heard. After a call lasting fewer than 20 minutes they had
agreed a deal – Mr Buffett would invest $5bn in the bank.

Mr Trott met with the same three Goldman executives and two others at 12.30pm following
previously arranged meetings. Over the next 45 minutes they agreed it was “a good deal to take”,
Mr Trott testified.

With a tentative agreement in hand, Mr Trott testified, he had to wait until 2.30pm to call Mr
Buffett back to relay the response. Mr Buffett had promised his grandchildren that he would
take them to Dairy Queen.

https://www.ft.com/content/6238d902-a501-11e1-b421-00144feabdc0 1/3
01/02/2019 Buffett banker details ‘top secret’ deal | Financial Times

“Warren warned me he was unreachable until 2.30pm New York time,” Mr Trott said. They then
spoke and agreed to the terms and sought Goldman board approval that day.

The Goldman board met at 3.15pm with many

Gupta trial: the key players
directors participating by phone. It was approved
just before the market closed at 4pm. They agreed
to announce the deal around 5pm or 6pm that
evening, he testified, saying the deal was “market
moving. It was very important to Goldman Sachs
to get the money.”

The deal was kept so secret, he said, that even Mr Buffett’s chief financial officer did not know
the terms until after the market closed.

Prosecutors allege Mr Gupta called Mr Rajaratnam, the hedge fund founder, less than a minute
after the board meeting concluded. Mr Rajaratnam’s assistant testified earlier this week that she
recalled Mr Rajaratnam had spoken with Gary Rosenbach, a top Galleon trader, who
subsequently began placing orders to buy Goldman shares. After the trade, she said, Mr
Rajaratnam was “smiling.”

Earlier on Wednesday, a Galleon trader testified that Mr Rajaratnam ordered him to buy
100,000 Goldman shares with less than four minutes left in the trading day. The trader said
another Galleon portfolio manager, Leon Shaulov, who had made a $170m bet that financial
stocks would drop instead was “pretty angry” the following morning. He said Mr Shaulov’s “hair
was all over the place. Red-faced. His eyes popped out.”

Mr Shaulov sent an email to Mr Rosenbach the previous night, after the Goldman deal was
announced, saying: “Thanks for the heads up, btw. I’m short 170mm fins. Not one word from
anyone. Thanks very much.”

Later in the day, when an FBI agent was questioned about wiretaps which are at the centre of
the prosecution case, the lawyer for Mr Gupta elicited testimony that only two out of nearly
2,200 recorded calls involved Mr Gupta.

The jury heard one of those calls between Mr Rajaratnam and Mr Gupta, which prosecutors
hope to use to show the men were friends and business partners and that Mr Gupta was freely
willing to discuss with him confidential board matters. On the July 2008 call Mr Rajaratnam
asks Mr Gupta about a rumor that Goldman may buy a commercial bank.

Mr Gupta says, “This was a big discussion at the board meeting…it was a, uh, divided discussion
in the board.”

Managing Assets for Insurers

https://www.ft.com/content/6238d902-a501-11e1-b421-00144feabdc0 2/3
01/02/2019 Buffett banker details ‘top secret’ deal | Financial Times

UK 2019
London
04 April 2019
Finding growth at a time of increasing uncertainty

Register now Presented by

Copyright The Financial Times Limited 2019. All rights reserved.

Latest on Rajat Gupta

Follow the topics in this article

Hedge funds
Galleon Management LP
Goldman Sachs Group
Rajat Gupta
Washington D.C.

How easy or hard was it to use FT.com today?

Leave feedback

https://www.ft.com/content/6238d902-a501-11e1-b421-00144feabdc0 3/3