Feeds

Ex-contender for top IBM job pleads guilty on securities charges

Takes number, gets in line

3 Big data security analytics techniques

The former senior IBM executive once considered a successor to chief Sam Palmisano and caught in an insider trading sting has pleaded guilty to two of the charges brought against him in court in New York.

The insider trading scheme revolves around Raj Rajaratnam, the founder and managing director of Galleon Management, formerly a $7bn New York hedge fund that was unwound last year in the wake of the scandal, and Danielle Chiesi, an employee at New Castle Funds, formerly the equity hedge fund group of Bear Stearns.

Both have been charged with trading on insider information on a number of tech deals, getting nearly $50m in illegal profits relating to Google, Polycom, AMD, Clearwire, Akamai Technologies and other companies.

In the complaint filed last October, senior vice president and general manager for IBM's systems and technology group Robert Moffat was accused of giving Chiesi, a friend, private information about AMD's spinoff of its chip making business to ATIC, IBM's quarterly earnings, and Sun Microsystems' quarterly earnings during the time when Big Blue was working to acquire Sun.

Moffat was arrested and charged with Rajaratnam, Chiesi, and three others with participating in insider trading that netted more than $20m in profits.

Two weeks later, Moffat stepped down from IBM, and over the next several weeks the US Attorney's Office expanded the case with 21 people being charged in interlocking rings of insiders and nearly $50m in ill gotten gains. In December, Moffat's lawyer, Kerry Lawrence, denied the charges leveled by the Securities and Exchange Commission (SEC) and the US Attorneys Office of insider trading, adding that Moffat did not say anything that was "material non-public information."

In the US District Court for the Southern District of New York on Monday, though, Moffat and Lawrence pleaded guilty to one count of conspiracy to commit securities fraud relating to information regarding the businesses of IBM, AMD, and Lenovo, which bought IBM's former PC unit and that had Moffat still on its board. Moffat also pleaded guilty to securities fraud relating to trades done by Chiesi in AMD stock.

This first charge carries a maximum five year jail term, while the latter charge has a maximum of 20 years. In consideration of Moffat's guilty plea the government is dropping insider trading charges relating to Sun, AMD, Lenovo, and IBM. The speculation is that Moffat might face six months in prison when all is said and done, and will not face any financial repercussions because he did not engaged in trading himself.

Thus far, 11 defendants relating to the Galleon insider trading scam have pled guilty and eight have become cooperating witnesses. Moffat is not cooperating with the government's investigation, apparently, but was obviously shown some leniency for some reason - no doubt to get a guilty plea in the first place, thus building a better case against Rajaratnam and Chiesi.

The fall from grace was no doubt a disappointment for both Moffat and IBM, who Moffat was tipped to run after president, chief executive officer and chairman Palmisano retires perhaps next year. ®

Combat fraud and increase customer satisfaction

More from The Register

next story
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.