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    Former IBM Exec Moffat Pleads Guilty to Fraud, Conspiracy

    By
    Jeff Burt
    -
    March 29, 2010
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      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.

      Jeff Burt
      Jeffrey Burt has been with eWEEK since 2000, covering an array of areas that includes servers, networking, PCs, processors, converged infrastructure, unified communications and the Internet of things.
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