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Ex-IBM heir apparent gets six months in the slammer

No 'get-out-of jail-free' card, says US attorney

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Robert Moffat, the former general manager of IBM's Systems Group and a former board member of Chinese PC maker Lenovo, has been sentenced in a federal court in connection with the Galleon insider trading scam that was uncovered last October.

Moffat, who was once an heir apparent to run Big Blue once Sam Palmisano retires, was indicted on charges that he fed New Castle Funds hedge fund employee Danielle Chiesi insider information on AMD, IBM, and Lenovo and that Chiesi and billionaire founder and managing director of the $7bn Galleon Management fund Raj Rajaratnam used this information to profit illegally. Moffat allegedly passed this information to Chiesi between August and October, 2008.

Moffat was never accused of doing any illegal trades of his own, and Chiesi and Rajaratnam both pleaded not guilty to the insider trading charges in December 2009. By March of this year, after protesting his innocence, Moffat pleaded guilty to the charges leveled against him, and by August, Moffat was admitting that Chiesi and he were "intimate" and that he was telling her stuff to "appear important and knowledgeable."

US District Judge Deborah Batts sentenced Moffat to six months in prison for his part in the insider trading scam and also tacked on a $50,000 fine and a two-year follow-on term of supervised release from prison. Moffat is being allowed to begin serving his sentence in June 2011 so he can attend his daughter's graduation next year.

"As a senior executive at IBM, Robert Moffat was entrusted with secret and valuable information," said Preet Bharara, the US Attorney for the Southern District of New York in Manhattan who is managing the Galleon cases.

"As today's sentence reflects, illegally betraying that trust is a serious crime, and even high-flying executives do not receive get-out-of-jail-free cards for participation in insider trading. This office, along with our partners at the Federal Bureau of Investigation and the US Securities and Exchange Commission, will continue to pursue illegal insider trading, which compromises the integrity of our markets."

Moffat, who is 54, worked for IBM for 31 years and has run its PC, printer, and server divisions as well as knocked its supply chain into shape, offshoring large portions of it to Asia to save Big Blue big bucks.

The alleged Galleon insider trading scam is still being billed as the largest such scam in US history, with 21 people being criminally charged and now a dozen pleading guilty. ®

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