Wednesday, May 23, 2012

How Buffett Did the Goldman Deal

** Details emerging from the insider trading trial against Rajat Gupta **

The second proposal had terms closer to Buffett’s liking, including $5 billion in preferred stock carrying a 10 percent interest rate and the right to buy common shares of stock in a new public offering. Buffett also insisted that top Goldman Sachs executives not sell their own shares.

“Was this discussion confidential?” Brodsky asked.

“Very,” said Trott, who was based out of Chicago and working out of New York at the time. Trott said that winning Buffett’s investment was “like getting the Good Housekeeping seal of approval.”

They hammered out the deal in a 20-minute telephone call on Sept. 23 in which Trott said he wanted Buffett to be the “cornerstone” of the transaction. After they reached a tentative agreement, Buffett told Trott not to telephone until later that afternoon because he had an important appointment.

“He told me he promised his grandkids to take them to Dairy Queen, and he was not to be interrupted,” Trott said. Goldman Sachs executives including Chief Executive Officer Lloyd Blankfein and Chief Financial Officer David Viniar signed off on the deal, and then took it to the full board of directors at 3:15 p.m. that day, Trott said. The board, including Gupta, met by telephone, he said.

“The impact on Goldman Sachs was market-moving,” he said. “The markets were in chaos.” Trott said he spoke to Buffett after the deal was approved, and Buffett asked him to brief Berkshire’s CFO, Mark Hamburg, with the details.

“Warren had alerted him that I’d be calling him about a deal he’d agreed to,” Trott said, laughing and turning to explain to the jury. “Mark Hamburg didn’t know the details until well after the close of the market.”

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