Hedge fund manager Raj Rajaratnam was told in mid-2008 of boardroom talks at Goldman Sachs about whether takeovers of Wachovia Corp or AIG made sense, jurors heard at his criminal trial.
Prosecutors in the high-profile insider trading trial in New York played a secretly recorded telephone call between Rajaratnam and Rajat Gupta, a Goldman director at the time who is accused by regulators of leaking inside information.
Rajaratnam is on trial for alleged insider trading involving Goldman and many other stocks.
There was a big discussion at the board meeting to buy a commercial bank, Gupta is heard telling Rajaratnam on the July 29, 2008, call. It was a divided discussion.
Gupta is heard saying that if Wachovia was a good deal, the board could be interested in it, and that American International Group also was in the discussion mix. The phone call was secretly recorded by the FBI.
Wells Fargo & Co paid $12.5 billion for Wachovia, which was weighed down by a huge portfolio of mortgage securities, in a deal completed on December 31, 2008. AIG, now almost entirely owned by the government, nearly collapsed in autumn 2008.
Onetime billionaire Rajaratnam, 53, was arrested in October 2009 in a massive insider trading probe that shook the secretive $1.9 trillion hedge fund industry. Nineteen people have pleaded guilty, while Rajaratnam, founder of the Galleon Group hedge fund, has vowed to clear his name at trial.
Prosecutors contend that Rajaratnam assembled an array of friends in high places who fed him stock tips. Rajaratnam's lawyers contend that he only traded stocks based on public information and Galleon's own expert research and analysis.
Gupta stepped down from Goldman's board in May 2010. He is also a former worldwide managing director at McKinsey & Co, an elite consulting firm, and until recently sat on the boards of AMR Corp and Procter & Gamble. Gupta has not been criminally charged.
The Gupta wiretap was played during the third day of testimony of another former McKinsey executive, Anil Kumar, who has pleaded guilty to supplying Rajaratnam with confidential information about the consulting firm's clients.
The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.
(Writing by Martha Graybow; additional reporting by Basil Katz; editing by John Wallace)