Goldman Sachs CEO Lloyd Blankfein appeared as a witness for the government in the trial of alleged insider trading mastermind Raj Rajaratnam, adding depth and color to the government's contention that the tips by former board member Rajat Gupta were a big deal.

Blankfein testified that directors "were bound by a duty of loyalty and confidentiality to the company" and must act in the best interests of the company. He added that board discussions and conversations between individual board members were considered confidential.

This followed the playing of the tape that captured Rajaratnam and Gupta on the phone talking about various potential moves to buy a bank or perhaps an insurance company.

Prosecutors allege Gupta in particular tipped Rajaratnam to Warren Buffett's agreement to buy $5 billion in Goldman Sachs preferred shares to prop up the bank. Gupta has consistently denied wrong-doing and has sued the SEC, arguing that charging him via an administrative action deprives him of due process.

It remains to be seen whether the testimony of a big-name CEO will add gravity to the prosecution's case. You can never tell how a jury will internalize information. But it can't hurt to have such a witness on your roster. It will be interesting to see how the defense treats him on cross examination. My sense is that they will be exceedingly polite whatever they ask.

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