Byron Trott on the September 2008 Berkshire/Goldman deal. I guess it is also a good example of Warren Buffett sticking to his commitments and doing what he says he’ll do. Even if there are billions of dollars on the line, he promised the grandkids ice cream, so Goldman would have to wait. It is also a good example of one of Ben Franklin’s 13 Virtues: “Resolution: Resolve to perform what you ought. Perform without fail what you resolve.”
Warren Buffett’s investment in Goldman Sachs Group Inc. (GS) in September 2008 was so confidential that even his chief financial officer was unaware of it before being briefed on the details by a Goldman Sachs executive, a witness at the Rajat Gupta trial testified.
Byron Trott, who was vice chairman of investment banking at Goldman Sachs and the architect of the $5 billion investment by Buffett’s Berkshire Hathaway Inc. (BRK/B), testified today at Gupta’s insider-trading trial. Prosecutors, who called Trott as a witness, claim that Gupta, then a Goldman Sachs director, tipped Galleon Group LLC co-founder Raj Rajaratnam before the Buffett deal became public on Sept. 23, 2008.
“It was a major, major event to Goldman Sachs and to the markets,” Trott told jurors in Manhattan. “$5 billion was not easily found at that time.”
Prosecutors summoned Trott to tell jurors about the secrecy surrounding a deal that came soon after the collapse of Lehman Brothers Holdings Inc. and while the markets were in free-fall. At the time, Goldman Sachs needed at least $5 billion to “continue to exist,” he said.
“Our entire foundation was built on confidential information, and it could never be breached,” said Trott, who left Goldman Sachs in 2009 after 27 years at the bank. He said he operated on a “need-to-know basis.”
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.
“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.