<p>NEW YORK (Reuters) – Goldman Sachs chief Lloyd Blankfein testified that the investment bank makes clear to board members that private discussions must stay confidential, as he was asked about an ex-director accused of improper leaks to hedge fund manager Raj Rajaratnam .</p>
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Blankfein began testifying on Wednesday as a government witness in the Manhattan federal court trial of Rajaratnam. The appearance of the CEO of Wall Street's most powerful bank intensifies the focus on what is already Wall Street's biggest insider trading case in decades.</p>
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Prosecutors called Blankfein to testify about Rajat Gupta, a former Goldman director accused by the U.S. Securities and Exchange Commission of tipping Rajaratnam about Goldman's activities. The SEC said Rajaratnam, founder of the Galleon Group, reaped $17.5 million from the illicit tips.</p>
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Dressed in a dark suit, white shirt and blue tie, Blankfein walked swiftly to the witness stand in the tense, packed courtroom of U.S. District Judge Richard Holwell.</p>
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He hesitated slightly when asked for his name, saying "Lloyd, uh, Blankfein," before spelling it for the court reporter.</p>
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Blankfein testified that it is important for Goldman directors not to disclose private discussions about the publicly-traded bank's business.</p>
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"We don't want information about our company to get out until it's appropriate," he said.</p>
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He also said premature disclosure inhibits the "free exchange" of ideas among directors, who might otherwise fear that what they say privately could become public.</p>
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Goldman has not been accused of wrongdoing. Blankfein, 56, has been Goldman's chief executive since June 2006.</p>
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Prosecutors have accused the Sri Lankan-born Rajaratnam, a one-time billionaire, of illegally making $45 million from 2003 to 2009 based on tips from insiders, some of whom were highly placed executives in corporate America.</p>
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Rajaratnam, 53, has said his trades were based on his own research and publicly available information. He has vowed to clear his name at trial.</p>
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Gupta, a former worldwide managing director at the McKinsey &amp; Co consulting firm, sued the SEC last week, accusing it of unfairly depriving him of a jury trial by pursuing an administrative proceeding rather than filing a formal lawsuit.</p>
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LIMITING BLANKFEIN TESTIMONY</p>
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Prosecutors earlier asked Holwell to block Rajaratnam's lawyers from cross-examining Blankfein on whether Goldman bears responsibility for the 2008 financial crisis, or is the subject of any Department of Justice or SEC probes.</p>
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They said such information is irrelevant to the trial, and could create unfair prejudice against Blankfein's testimony.</p>
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In court on Wednesday morning, Rajaratnam lawyer John Dowd said "I'm not going to inquire" about pending investigations. He also said he may recall Blankfein to the stand later.</p>
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The government has said it intends to play FBI phone taps of Gupta tipping Rajaratnam about an expected $5 billion preferred stock infusion from Warren Buffett's Berkshire Hathaway Inc in September 2008, at the height of the financial crisis.</p>
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Goldman on Friday said it plans to buy back the preferred stock, saving it $500 million of annual dividends.
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Rajaratnam's trial began on March 8, and is expected to last two months.
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Blankfein took the witness stand after Rajiv Goel, a former Intel Corp managing director and longtime friend of Rajaratnam who is cooperating with the government. Goel began testifying on Tuesday, and is expected to resume testifying later.
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The case is U.S. v. Rajaratnam, U.S. District Court, Southern District of New York, No. 09-01184.
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(Additional reporting by Lauren Tara LaCapra; editing by Dave Zimmerman)</p>
            