Buffett Watch

Hedge Fund Got Advance Tip from Goldman Insider of Warren Buffett's $5 Billion Lifeline - WSJ


Government investigators believe a Goldman Sachs director improperly told Galleon Group hedge fund founder Raj Rajaratnam that Warren Buffett's Berkshire Hathaway would be making a $5 billion investment in Goldman in September of 2008, according to a report this morning in the Wall Street Journal.

Goldman Sachs director Rajat Gupta
Goldman Sachs Website

In a court filing on March 22, the government alleges that Rajaratnam or "co-conspirators" traded on inside information about Goldman.  Another filing last week specifically accuses the hedge fund billionaire of receiving advance word of Buffett's investment.

The Journal quotes a "person close to the situation" as saying Rajaratnam got the tip from Goldman director Rajat Gupta.

According to the Journal, Gupta has been told by Federal prosecutors that they recorded phone calls between him and Rajaratnam.

Raj Rajaratnam (center) is led from FBI headquareters in New York City on October 16, 2009, after being charged with alleged insider trading.

Last month, Gupta told Goldman he won't stand for re-election as a director

The Journal calls Buffett's investment in Goldman a "watershed moment in the financial crisis" because it helped ease fears at the time about the stability of the global financial system.  It has turned out to be very profitable to Berkshire.  The value of warrants it got in the deal, however, has been reduced by over $1 billion due to Goldman's recent stock slide in the wake of SEC charges against the firm.

The newspaper calls the Gupta revelation a "significant turn" in the massive insider-trading case against Rajaratnam.

Gupta's lawyer tells the Journal, "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."

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