Ex-IBM Exec Moffat Says Business Was at Heart of Relationship

 
 
By Jeffrey Burt  |  Posted 2010-07-07
 
 
 

Robert Moffat, the former longtime IBM executive who pleaded guilty in March to federal securities and fraud charges for his role in a massive insider trading case, said his relationship with an ex-hedge fund manager was more about business than sex.

In a detailed story about the case in Fortune magazine published July 6, Moffat, who spent 31 years with IBM before his arrest in October 2009, said his affair with Danielle Chiesi was grounded in business, despite the allegations of a physical relationship.

In an interview with the magazine, Moffat said he was not allowed, per the advice of his lawyer, to discuss his relationship with Chiesi, one of the central figures in an insider trading scandal that led to the arrests of almost two dozen people from the financial and tech industries.

When told that Fortune planned to include the affair with Chiesi in the article, Moffat responded by saying: "Everyone wants to make this about sex. Danielle had an extensive network of business people. And she added clarity about what was going on in the business world. ... I know in my heart what this relationship was about: clarity in the business environment."

Moffat was arrested after being caught on federal wiretaps giving information to Chiesi, who at the time was a portfolio manager at hedge fund New Castle. Moffat, who at the time of his arrest was senior vice president and group executive of IBM's $20 billion Systems and Technology Group, talked to Chiesi about Advanced Micro Devices' plans to spin off its chip manufacturing business in a joint deal with an Abu Dhabi investment company. AMD last year spun off the business, creating Globalfoundries.

Moffat also gave Chiesi confidential information about IBM finances, Lenovo finances and IBM's pursuit of Sun Microsystems.

He resigned from IBM soon after his arrest.

In March, he pleaded guilty to one count each of securities fraud and conspiracy. Moffat, who at one time was considered a possible successor to current IBM CEO Sam Palmisano, is expected to be sentenced later this year to at least six months in prison.

In the Fortune magazine story, Moffat is described as "emotional, repentant, and chastened," weeping as he told the reporter of the embarrassment he brought to his family, IBM and his colleagues. He also talked about what he lost because of his arrest, including $65 million in stock options and pension that he would have collected when he retired at age 60.

"The biggest thing I've lost is my reputation," he told the magazine.

Chiesi and Raj Rajaratnam, founder and managing partner of the hedge fund Galleon Group, are the key players in the insider trading scandal. Both have denied the charges, and both are scheduled to go on trial in October.

Moffat became the 11th person to plead guilty in connection with the case. Another tech figure arrested was Rajiv Goel, a former executive with Intel's treasury group. Goel, who no longer is with the company, 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. Several publications have said that Hector Ruiz, former CEO of AMD, was one of those people. The Fortune article also names Ruiz as someone who spoke with Chiesi.

Ruiz has not been charged with a crime, though the Fortune story says he is under investigation by federal authorities in connection with his dealings with Chiesi.

After news reports linking his name with Chiesi, Ruiz resigned in November 2009 as chairman of Globalfoundries' board.


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