Union Group Seeks Wider Probe of IBM Executives

By Jeffrey Burt  |  Posted 2009-10-22 Print this article Print

Alliance@IBM, which is looking to unionize IBM's U.S. work force, is asking the SEC and DOJ to investigate all IBM executives in the wake of hardware chief Robert Moffat's arrest in connection with a $25 million insider trading scheme. Alliance@IBM also is running a poll asking people whether IBM executives should be investigated.

A group that is looking to unionize IBM's U.S. workers is using the arrest Oct. 16 of hardware chief Robert Moffat on insider trading charges to ask federal regulators to investigate all company executives.

Alliance@IBM, which comprises current and former IBM employees, has been highly critical of the company's labor practices, including layoff policies, the shipping of U.S. jobs to other countries and executive pay during the global recession.

In an open letter on its Website to the Securities and Exchange Commission and Department of Justice, the group is asking regulators to investigate all IBM executives to ensure they're following IBM ethics guidelines. The group also is asking for investigation into the timing of all executive stock option sales and into any insider trading allegations.

Alliance@IBM also is running a poll on its site, asking whether IBM executives, in light of Moffat's arrest, should be investigated by federal regulators. As of mid-morning Oct. 22, 459 people have said yes, 174 have said no, and one person was unsure.

Moffat is a 31-year IBM veteran and currently senior vice president and group executive of the company's Systems and Technology Group, which includes the company's $20 billion hardware business. He was one of six people charged Oct. 16 in an insider trading scheme that investigators said resulted in $25 million in illegal gains.

In particular, Moffat is accused of giving information to Danielle Chiesi, a friend and portfolio manager at hedge fund New Castle Funds, in 2008 and 2009 regarding IBM finances, Sun Microsystems's finances and IBM's interest in buying the rival hardware maker, and chip maker Advanced Micro Devices' dealings with two Abu Dhabi companies that resulted in AMD spinning off its manufacturing business to create Globalfoundries.

IBM has placed Moffat on leave and also was removed as an officer of the company. Moffat's lawyer has claimed his client's innocence.

IBM has declined to comment on the case.

In its open letter, titled "A Call to Investigate," Alliance@IBM says that Moffat's case is only the latest example of executive greed at the company, and is particularly concerning considering Moffat's stature and the belief by some that he was seen as a strong candidate to eventually take over for CEO Sam Palmisano.

The investigation nabbed managers at two hedge funds, New Castle and Galleon Management, as well as a director with McKinsey and Co. and Rajiv Goel, an executive with Intel's treasury unit.

Goel allegedly gave Raj Rajaratnam, founder and managing partner of hedge fund Galleon Management, information on Intel finances and Clearwire, a wireless company that Intel had invested in.

Goel has been placed on administrative leave by Intel. Intel executives say the company knew nothing of Goel's alleged actions or the federal investigation, and is conducting an internal probe of its own.

IBM has had its share of legal troubles of late. Apart from the Moffat case, federal investigators reportedly are looking into IBM's mainframe business for possible antitrust violations.


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