IBM Exec Resigns Following Arrest

Server chief Robert Moffat steps down amid charges of insider trading.

Paul McDougall, Editor At Large, InformationWeek

November 2, 2009

2 Min Read

A senior IBM executive has resigned from the company in the wake of his arrest last month on a securities fraud charge. Robert Moffat, who was senior VP over Big Blue's $19 billion Systems and Technology group, formally retired last week.

Moffat's arrest stemmed from his alleged involvement in what authorities have called the largest hedge fund insider trading scheme in history. His duties have been assumed by IBM veteran Rodney Adkins.

Moffat and several alleged accomplices from the tech and investment industries were arrested Oct. 16 on a range of insider trading charges. Also charged were Raj Rajaratnam, of Galleon Management, Danielle Chiesi and Mark Kurland, of New Castle Funds, Anil Kumar, of consulting firm McKinsey, and Intel Strategic Investments director Rajiv Goel.

Authorities fingered Galleon's Rajaratnam as the alleged mastermind of the scheme, which involved numerous individuals.

U.S. Attorneys worked on the case for months with investigators from the Federal Bureau of Investigation. The defendants are alleged to have illegally shared insider information through telephones that had been secretly tapped by the authorities.

Among other things, prosecutors allege that in August of last year 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, that would be partly financed by investors from Abu Dhabi.

"When asked the chances that the deal would fail, Moffat replied, 'Zero,'" prosecutors allege. The prosecutors contend that Moffat was privy to AMD's plans because the deal required Foundry to license certain technologies from IBM.

Prosecutors also contend that Chiesi obtained insider information from Moffat concerning Sun Microsystems. IBM was reportedly in talks to acquire Sun earlier this year, but the company was ultimately snapped up by Oracle in April for $7.4 billion.

Prosecutors allege that Moffat, Kurland, and Chiesi "engaged in overlapping schemes to commit insider trading."

Moffat was charged with one count of Conspiracy to Commit Securities Fraud. He faces up to five years in prison if convicted. He also faces fines of up to $250,000, or twice the gross gain or loss from any transactions related to the alleged scheme.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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