Robert Moffat, senior vice president in charge of IBM's hardware business, is one of seven people named by the SEC as part of an insider trading scheme that illegally netted $25 million. Moffat and Intel Treasury executive Rajiv Goel are among those accused of giving insider information on such companies as Google, AMD and Sun Microsystems to two managers at New York-based hedge funds, who allegedly used the information in their trades.
Robert Moffat, a 31-year IBM
currently is in charge of the tech vendor's hardware business, is one of seven
people charged in an insider trading scheme that federal investigators say
generated $25 million in illegal gains.
Moffat was named in a complaint Oct. 16 filed by the Securities and Exchange
Commission in U.S. District Court in New York City.
Moffat and Rajiv Goel, an executive with Intel Capital, were among those
charged in an investigation into the workings of hedge fund company Galleon
Management and Raj Rajaratnam, a managing member of the hedge fund.
According to the SEC, Moffat and Goel were among a "network of friends
and close business associates" that fed Rajaratnam "insider tips and
confidential information about corporate earnings or takeover activity at several
companies," including Google, Sun Microsystems, Advanced Micro Devices,
Akamai Technologies and Polycom.
Rajaratnam allegedly then used that information to conduct trades for
Galleon, the investigators said.
Also charged were Danielle Chiesi, a portfolio manager at hedge fund New
Castle Funds; Anil Kumar, a director at McKinsey & Co.; and Mark Kurland, a
senior managing director and general partner at New Castle. New Castle Funds
and Galleon Management also were named in the complaint.
A spokesperson for IBM said the company
had no comment on the situation.
Moffat has been with IBM since 1978,
climbing up through the executive ranks to become senior vice president and
group executive of the company's Systems and Technology Group. He was named to
the position in July 2008 to oversee IBM's
$20 billion hardware business.
According to the SEC, Moffat gave inside information to Chiesi about Sun
around the time when IBM officials were
thinking about acquiring the rival hardware maker. Chiesi allegedly took the
information and made trades for New Castle
that netted the hedge fund about $1 million in profits.
Rumors of IBM's
interest in Sun
emerged earlier in 2009. Eventually software giant Oracle
announced it was buying Sun for $7.4 billion,
an acquisition that is still
pending as European regulators conduct an investigation into the deal.
Goel, the Intel Capital executive, reportedly gave information to Rajaratnam
about Intel quarterly earnings and an upcoming joint venture with Clearwire, a
wireless company that Intel
had invested in.
As payback for the Intel information, Rajaratnam or
someone working for him executed trades in Goel's personal brokerage account
based on inside information obtained from others about Hilton and PeopleSupport
that netted Goel almost $250,000, according to the SEC.
Kumar allegedly gave Rajaratnam inside information about deals involving AMD
and two Abu Dhabi-based companies. AMD in
March in a joint venture with Advanced Technology Investment Company, of Abu
Dhabi, spun off its manufacturing business to create
"What we have uncovered in the trading activities of Raj Rajaratnam is
that the secret of his success is not genius trading strategies," Robert
Khuzami, director of the SEC's Division of Enforcement, said in a statement.
"He is not the astute study of company fundamentals or marketplace trends
that he is widely thought to be. Raj Rajaratnam is not a master of the universe,
but rather a master of the Rolodex. He cultivated a network of high-ranking
corporate executives and insiders, and then tapped into this ring to obtain
confidential details about quarterly earnings and takeover activity."
The SEC is looking for sanctions against all the defendants, and also is
asking the court to prohibit Moffat, Goel and Kumar from holding officer or
director positions within any registered public company.
Chuck Mulloy, an Intel spokesperson, said Goel has been put on
administrative leave pending the company's own investigation into the matter.
Goel was named in the complaint as a managing director at Intel Capital, a
subsidiary of the giant chip maker, but Molloy said he worked with Intel
Treasury, which manages Intel's money.
"Intel was not aware of this case and was not contacted by
authorities," Mulloy said, adding that Intel executives found out about
the complaint Oct. 16. "But if contacted by authorities, Intel will