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Lloyd C. Blankfein, the Goldman Sachs Group Inc. Chief Executive, told a jury in the Galleon insider-trading trial Wednesday that a former director violated a confidentiality policy when he revealed boardroom secrets to Galleon Group founder Raj Rajaratnam, the Wall Street Journal reports.

Blankfein testified in court after federal prosecutors had played a covertly-taped telephone conversation between former Goldman board member Rajat Gupta and Mr. Rajaratnam. In the conversation, recorded in July of 2008, Mr. Gupta can be heard informing Rajaratnam about a confidential talk that Goldman's board had concerning the potential acquisition of an insurance company or commercial bank, such as American International Group Inc. or the Wachovia Corp.

Blankfein, serving as a witness for the government, told the court that Gupta was present at the June, 2008 meeting in which the confidential discussion had occurred.

"On that call, did Rajat Gupta violate Goldman Sachs's confidentiality policy?," Special Assistant U.S. Attorney Andrew Michaelson asked Blankfien.

"Yes," Mr. Blankfein said.

Rajaratnam's lawyer, John Dowd, cross-examined Blankfein and tried to elicit testimony that there had already been rumors in the media about Goldman possibly acquiring a commercial bank. Dowd cited newspaper articles about the potential deal from April 2008 and July 2008. Blankein said he considered the deal confidential until the details were publicly announced.

Prosecutors allege that Gupta offered insider info to Rajaratnam, including a $5 billion investment by Warren Buffett's Berkshire Hathaway Inc. during the depths of 2008's financial crisis. This period saw Goldman's first reported loss since it became a public company in 1999.

This month the Securities and Exchange Commission accused Gupta of giving Mr. Rajaratnam information about the Berkshire Hathaway investment and Goldman's earnings. Gupta denied any wrongdoing and promptly sued the SEC, accusing them of violating his constitutional rights. Gupta claims the SEC's administrative action denies him the procedural safeguards (such as a trial by jury) that would be available if the case was brought in civil court.

Source: Wall Street Journal