GS insider trading probe aimed at healthcare tips

NEW YORK (Reuters) - The newest Goldman Sachs insider trading probe is focused on a San Francisco-based investment banker suspected of tipping off a hedge fund manager about two health care deals, according to a source who could not be identified.

Federal prosecutors in Los Angeles are looking into whether Matthew Korenberg told Galleon Group founder Raj Rajaratnam of acquisitions of Advanced Medical Optics and MedImmune in 2009 and 2007, respectively, before the deals were made public, the source said.

"We have been aware of these allegations for more than two years, investigated them, fully cooperated with federal authorities in the matter, and Matt Korenberg remains actively employed by the firm," said a spokesman for Goldman Sachs.

John Hueston, a partner at Irell & Manella who is a former Department of Justice lead prosecutor against former Enron executives Kenneth Lay and Jeffrey Skilling, and who later successfully defended former Countrywide Financial CEO Angelo Mozilo, is representing Korenberg.

"The government has had an ongoing investigation for over two years with no results and nothing to show and that's because Matt Korenberg has never tipped anyone, has never even alleged to have been involved in tipping and has had nothing but a distinguished career with Goldman Sachs," Hueston said.

Word of the investigation first emerged a week ago at a hearing in the insider trading case against Rajat Gupta, a former Goldman Sachs director, in federal court in New York. Gupta has been charged with passing inside information about Proctor & Gamble and Goldman Sachs to Rajaratnam.

The cases are related because Gupta is accused of tipping Rajaratnam. His lawyer, Gary Naftalis, a partner at Kramer Levin in New York, is arguing that federal prosecutors got the wrong man when they charged Gupta with insider trading.

"It is indisputable that there is no relationship whatsoever between Matt Korenberg and Gupta or any transactions at issue in the Gupta case and Korenberg didn't work on any deals in the Gupta case," Hueston said.

"His name never should have surfaced. It's entirely improper and it's a shame."

Abbott Laboratories bought Advanced Medical Optics. Advanced Medical Optics shares jumped 143 percent on January 12, 2009, the day the deal was announced.

When AstraZeneca revealed its plans to purchase MedImmune for $15.2 billion, MedImmune's shares rose by 18 percent.

Korenberg's name was first reported by the New York Times.

(Reporting By Emily Flitter and Lauren Tara LaCapra; Editing by Tim Dobbyn and Leslie Gevirtz)