Former Systems & Technology senior VP Bob Moffat gets six-month term after pleading guilty to conspiracy and fraud charges.

Paul McDougall, Editor At Large, InformationWeek

September 14, 2010

2 Min Read

A former IBM executive once thought to be a possible successor to CEO Sam Palmisano has been sentenced to six months in prison for his role in what federal prosecutors called the largest hedge fund insider trading case in history.

Robert "Bob" Moffat, 54, of Ridgefield, Conn., received his sentence Tuesday in federal court in New York in lower Manhattan. Moffat also was fined $50,000 and ordered to undergo two years of post-release supervision.

Moffat, who ran IBM's hardware unit until the scandal broke, earlier this year pled guilty to one count of conspiracy and one count of securities fraud. He admitted feeding confidential tech industry information to alleged inside trader Danielle Chiesi. Prosecutors claim Chiesi, with whom Moffat had an affair, in turn gave the information to her bosses at investment firm New Castle Funds.

New Castle was involved in a broader scheme that allegedly fed insider information to traders at Galleon Group. Numerous individuals in the tech and financial industries were caught up in the case and charged. Chiesi pled not guilty and is awaiting trial.

Prosecutors said Moffat's sentence shows the government does not take white collar crime lightly. "As a senior executive at IBM, Robert Moffat was entrusted with secret and valuable information," said Manhattan U.S. attorney Preet Bharara, in statement.

"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," said Bharara.

Moffat has said his relationship with Chiesi was motivated not so much by sex or money as it was his desire to know "what was going on in the business world." In a bizarre admission to Fortune magazine earlier this year, Moffat said the tech industry pillow talk he shared with Chiesi was the main motivation behind their romantic liaisons.

"Everyone wants to make this about sex," Moffat said in an interview published by the magazine. "Danielle had an extensive network of business people. And she added clarity about what was going on in the business world," Moffat said.

"I know in my heart what this relationship was about: clarity in the business environment," he said.

Among other things, Moffat was caught on tape informing Chiesi of AMD's plans to spin off its chip manufacturing arm into a separate company, to be called Foundry, which would be partly financed by investors from Abu Dhabi. IBM was aware of the plan because of a licensing arrangement with AMD.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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