Robert Moffat, a 31-year IBM veteran and at one time considered a possible IBM CEO candidate, pleads guilty to his role in an insider trading scheme that federal prosecutors say generated $25 million in illegal gains. Moffat faces up to six months in prison when he is sentenced in July. His lawyer says Moffat's deal does not include cooperating with prosecutors.
Robert Moffat, at one time considered by industry observers to be a possible
future CEO at IBM,
now could spend up to six months in prison after pleading guilty March 29 to
federal securities
fraud and conspiracy charges.
Moffat admitted in U.S. District Court in New
York City that he shared nonpublic information
regarding Advanced Micro Devices and Lenovo as well as IBM
with Danielle Chiesi, a friend and at the time a portfolio manager with hedge
fund New Castle Funds.
The former IBM executive
reportedly told the judge he knew that what he was doing was wrong and that it
would benefit Chiesi. Moffat's lawyer, Kerry Lawrence, said in a statement that
Moffat did not profit from his dealings with Chiesi.
"It is also important to understand that he never engaged
in any trading in connection with the transactions involving AMD,
Lenovo or IBM, and received no money or
other financial benefit from anyone relating to those transactions," Lawrence
said.
Moffat will be sentenced July 26. At the time of his arrest in
October 2009, he was senior vice president and group executive of IBM's
$20 billion Systems and Technology Group. He soon left IBM
after 31 years with the company.
Moffat was arrested along with several other figures in what
federal investigators said was the largest case of its kind involving a hedge
fund. Twenty-one people have been charged in connection with the insider
trading scheme, which prosecutors said generated $25 million in illegal gains.
At the center of the case are Chiesi and Raj Rajaratnam,
founder and managing partner of hedge fund Galleon Group. Both have denied any
wrongdoing, and both are scheduled to go on trial in October.
Chiesi and Rajaratnam are accused of making trades based on
insider information gleaned about such companies as AMD,
Akamai Technologies and Sun Microsystems.
For Moffat, who at the time of his arrest was among those
listed as possible successors to current IBM
CEO Sam Palmisano, it was a fast fall.
Federal investigators used wiretap technology normally used in organized crime
probes in their investigation, and Moffat was recorded several times in 2008
talking to Chiesi about AMD's plans to spin
off its manufacturing business. AMD in 2009 did
spin off that business to create Globalfoundries.
Moffat also was accused of disclosing information about Lenovo,
as well as information about IBM's finances
and its reported interest in buying Sun.
He is the 11th person to plead guilty in connection
with the case. At least eight others have agreed to testify in court for the
prosecution. Moffat's lawyer, Lawrence, said his client has not made such a
deal.
Other tech figures implicated in the scheme include Rajiv Goel,
a former executive with Intel's treasury group, who
pleaded guilty to charges involving leaking of information about Intel and
Clearwire to Rajaratnam. Goel will be sentenced May 28.
In addition, Chiesi is accused of getting information from two
other unnamed people. Several publications, quoting unnamed sources, said
former AMD CEO
Hector Ruiz was one of those people.
Ruiz
has since left his position as chairman of Globalfoundries. He has not been
charged or officially named in the case.
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