Gold Sachs Probe Turns to *Buffett Deal* -- Whoa! We called it here on DU in 2008

Probe Turns to Buffett Deal
Government Suspects Goldman Director Told Galleon of Berkshire's 2008 Investment

By SUSAN PULLIAM

Business * APRIL 23, 2010


A Goldman Sachs Group Inc. director tipped off a hedge-fund billionaire about a $5 billion investment in Goldman by Warren Buffett's Berkshire Hathaway Inc. before a public announcement of the deal at the height of the 2008 financial crisis, a person close to the situation says.

The revelation marks a significant turn in the government's case against Raj Rajaratnam, the hedge-fund titan at the center of the largest insider-trading case in a generation. Mr. Buffett's investment in Goldman in September 2008 was a watershed moment in the financial crisis. One of the world's savviest investors, Mr. Buffett helped allay fears about the instability of the financial system by backing America's leading investment bank.

The new disclosure stems from a government examination into whether the Goldman director, Rajat Gupta, gave inside information to Mr. Rajaratnam. In a court filing March 22, the government alleged that Mr. Rajaratnam or "co-conspirators" traded on non-public information about Goldman. In a filing last week, the government provided more details about the information it alleges Mr. Rajaratnam received, including advance notice about the Buffett transaction with Goldman.

chill_wind

Wed Sep-24-08 08:28 PM

Goldman's shares get suspicious boost pre-Buffett

By Kristina Cooke


NEW YORK, Sep. 24, 2008 (Reuters) — An unusual surge in Goldman Sachs' share price in the last 10 minutes of trading on Tuesday raised eyebrows on Wall Street, as it came two hours before news of Warren Buffett's big investment in the bank.


Goldman Sachs shares rose more than $5 heading into the close of trading even as the rest of the market tumbled, leaving traders suspicious that inside information was used to make a profit.

"Obviously someone knew the Buffett news that was coming out. I noticed it yesterday and I was telling my colleagues something is going on with Goldman," said Dave Rovelli, managing director of US Equity Trading at Canaccord Adams in New York.

Securities and Exchange Commission> spokesman John Nester declined to comment on whether the incident is being investigated. Goldman Sachs could not immediately be reached for comment.

Reuters reports today that "The incoming Treasury secretary, Henry M. Paulson Jr., was awarded an $18.7 million cash bonus for half a year of work as the chief executive of the Goldman Sachs Group." The massive bonus was, not surprisingly, approved by Goldman Sachs at the very same time Paulson was both CEO and Treasury Secretary designate. This raises a very simple question: What is Goldman Sachs buying with this brazen payoff to someone they knew was headed to one of the most powerful government posts in America?

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So again, a simple question: With Goldman Sachs handing incoming Treasury Secretary Henry Paulson an $18.7 million bonus for six months of service, what is the company looking for in return? After all, Goldman Sachs has had a lot of business before the government that Paulson's Treasury Department has been involved in and can influence. Here are just a few factoids about the Goldman Sachs-Government connections that raise questions about the Paulson payoff:

- The nonpartisan Project on Government Oversight (POGO) noted in a major 2002 study that Goldman Sachs is one of the largest beneficiaries of government contracts in America.

It is also one of the contractors that POGO noted "have been found to have repeatedly broken the law or engaged in misconduct," yet still receives government contracts.

- MSN Money notes that Goldman Sachs main profit-makers is its offering of "investment banking services to corporate and government clients."

- The Associated Press reported in 2004 that "Goldman Sachs is being sued by investors who say the firm cost them money by trading on advance knowledge of the Treasury Department's announcement in October 2001 that the government was ending sales of new 30-year bonds." Goldman Sachs "previously settled government charges that one of its economists used an illegal tip to make millions for the firm in advance of the announcement."