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IBM Cloud: Article

Ex-IBM Big Shot Pleads Guilty in Insider Trading Case

Moffat: "I disclosed this information intentionally and I knew that it was wrong."

Robert Moffat, who headed both IBM’s server unit and IBM Microelectronics until he was arrested last October, pleaded guilty to twin counts of securities fraud and conspiracy Monday morning in a Manhattan courtroom.

He was one of the highest-ranking industry executives that the Galleon Group and its playmates used to get inside information from. Another is ex-AMD CEO Hector Ruiz who has not been charged.

The authorities, who taped thousands of hours of telephone calls between the various culprits, say the ring realized $50 million on such tips. It is supposed to be the biggest hedge fund insider trading case ever in America.

According to most accounts, Moffat, 53, admitted in court to giving ex-beauty queen-turned-trader Danielle Chiesi confidential information about AMD’s restructuring, Lenovo’s weak earnings and IBM’s troubled server sales.

Apparently no mention was made of the original charges that he also gave Dani, 44 and a Galleon informant, IBM and Sun’s quarterly results too.

The Lenovo disclosures are a new item.

Moffat, who as one-time head of IBM’s PC operation played a key role in IBM’s sale of the unit to Lenovo in 2006, was a non-voting member of Lenovo’s board. He knew about AMD’s deal with Abu Dhabi because IBM Microelectronics had to license AMD’s spun-out plants to use IBM process technology, he knew about Sun’s results because IBM at the time was doing due diligence on Sun with an eye to buying the joint and he had IBM’s results in his pocket because he was an officer of the company.

What remains a mystery is why he would open his mouth at all unless it was to get in Dani’s pants. “I knew the information I provided would be helpful to her,” he reportedly told the court.

In a statement released after the plea his lawyer Kerry Lawrence said:

“While he has pleaded guilty 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.”

Moffat reportedly told US Magistrate Judge Frank Maas that “I provided to Ms Chiesi information that was confidential and not public. I also knew I owed a duty to my employer IBM. I disclosed this information intentionally and I knew that it was wrong.”

His voice was described as “trembling at times,” “shaky” and “briefly wavering.”

Moffat, who is often described as a candidate for the CEO’s job at IBM, is supposed to be sentenced on July 26. With the plea deal and under federal guidelines, it seems he could draw no more than six months in the calaboose. Otherwise it might have been 20 or 25 years. He remains out on $2 million bail.

He is not cooperating with the prosecutors as are most of the other 10 people to plead guilty so far. They are expected to testify against Chiesi and alleged ringleader, Galleon hedge fund founder and billionaire Raj Rajaratnam, at their trial later this year. Chiesi and Rajaratnam, who once dreamed of moving Moffat to a company where they could really clean up and are now looking at doing real time, are currently trying to get separate trials.

Despite FBI wire tap evidence, Moffat originally claimed to be innocent.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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