Robert Moffat, who spent 31 years with IBM, now faces six months in prison after admitting to giving out inside information about IBM, Lenovo and AMD.
Ex-IBM executive Robert Moffat on Sept.
13 was sentenced to six months in prison for his role in a massive $25 million
insider trading scandal.
Moffat, who had spent 31 years with the technology giant and
was senior vice president and group executive of IBM's
$20 billion Systems and Technology Group at the time of his arrest in October
2009, admitted that he had passed on information about IBM's
finances, Lenovo's financial earnings and Advanced Micro Devices' efforts to
spin off its manufacturing business to create what is now Globalfoundries to a
friend, Danielle Chiesi, a portfolio manager with hedge fund New Castle Funds.
Chiesi is a key figure in the insider trading case that roped
in more than two dozen people, including some executives with technology
Moffat, who no longer is with IBM,
guilty in March
to securities fraud and conspiracy charges. He had asked
for a sentence of probation, a request that was denied by U.S. District Court
Judge Deborah Batts during a hearing in a Manhattan
Batts reportedly said Moffat's crimes were as harmful as
"White-collar crime is just as destructive to our social
fabric as the crimes of drugs and violence," Batts said, as quoted
by Bloomberg News.
"There is a need in the sentence imposed to promote
respect for the law."
Batts said Moffat will have to pay $50,000 after he is released
from prison, and questioned why Moffat, who some had said was a candidate to
become CEO after Sam Palmisano retires,
would commit such acts.
"Why the defendant betrayed the only employer he has had
for his entire career has not been addressed," Batts said. "His
astounding breach of his fiduciary duty to his employer is why he is
At his sentencing hearing, Moffat said he had no one to blame.
"Your honor, I made a terrible mistake in judgment which
will haunt me for the rest of my life," he reportedly said. "What I
did was wrong. I alone am responsible for my conduct."
Moffat's lawyer, Kerry Lawrence, said Moffat is not cooperating
with the investigation, according to Bloomberg.
Bloomberg also said Assistant U.S. Attorney Andrew Michaelson
said during the hearing that Moffat's actions damage the reputation of the
market, giving people the belief that the "markets are rigged."
Michaelson argued, "When the market is harmed, the economy
is harmed and we are all harmed. That is what makes the crime of Mr. Moffat's
Moffat admitted to having a personal relationship with Chiesi,
but said in a
story in Fortune magazine
in July that the relationship was about
business more than sex, despite allegations of a physical relationship.
He was arrested after being caught by a federal wiretap giving
information to Chiesi.
Chiesi and Raj Rajaratnam, co-founder of the Galleon Group
hedge fund group, are the central figures in the case, in which they are
accused of making millions of dollars in illegal stock trades based on the
insider information from Moffat and others. Both have denied the charges and face
trial in 2011.
Other technology executives implicated in the case include
Rajiv Goel, a former official with Intel's treasury group, and former AMD
CEO Hector Ruiz. Goel, who no longer is with
Intel, pleaded guilty in February to charges involving the leaking of
information about Intel and Clearwire to Rajaratnam.
Chiesi also is accused of getting information from unnamed
sources, and several news sites have said Ruiz was one of those people. Ruiz
has not been charged with a crime, though the Fortune story said he was under
investigation by federal authorities in connection with his dealings with