Former Goldman Sachs board member Rajat Gupta, who has been accused by the Securities and Exchange Commission of insider trading, is heard on tape telling hedge fund manager Raj Rajaratnam that the Goldman board had a "divided" discussion in the summer of 2008 about trying to buy a commercial bank such as Wachovia, or even an insurance company like AIG.
The conversation, on July 29, 2008 as the financial crisis was unfolding, was played for jurors in the criminal insider trading trial of Rajaratnam, which is in its second week.
"There was a big discussuion at the board meeting on whether we...buy a commercial bank, and you know it was a divided discussion in the board," Gupta tells Rajaratnam on the call, which was secretly wiretapped by the government.
The global credit crisis was worsening, and Gupta says the board discussion centered on whether "we should explore more global sources of funds" by acquiring a bank or an insurance company, "not that we're having trouble funding ourselves," Gupta notes, according to the government's transcript of the call.
"If Wachovia was a good deal, and then, you know, it's quite conceivable they'd come in and say let's buy Wachovia," Gupta says.
"Or even AIG, right?" asks Rajaratnam.
"Or even AIG. AIG, it was definitely in—in the discussion."
A Goldman Sachs spokesman did not immediately respond to a request for comment. No deal came to pass, but Goldman Sachs did convert itself to a bank holding company at the height of the crisis.
Through his attorney, Rajat Gupta has called the SEC's allegations of insider trading "baseless."
Gupta was more than just a tipster for Rajaratnam, according to testimony by Anil Kumar, a former senior partner at McKinsey Co., where he worked for Gupta.
Kumar testified that Gupta was a partner with Rajaratnam in a private investment fund, and that Gupta lost his initial $10 million investment in the fund in 2008.
Kumar testified that Gupta was also in discussions with Rajaratnam to serve as chairman of an international arm of Rajaratnam's Galleon Group.