backtop


Print 45 comment(s) - last by Donkey2008.. on Nov 3 at 12:49 AM


IBM's top hardware executive, Robert Moffat, has been arrested for giving an insider trading tip to a female friend.  (Source: CRN.com)

Billonaire investor Raj Rajaratnam masterminded the scheme that may land an IBM and Intel exec, as well as an executive at a company that advised AMD, in prison.  (Source: Onlanka News)
Some high profile executives may be finding their way to a white-collar prison

In a move that could rock the electronics industry, "classic IBM executive" Robert Moffat, IBM's highest ranking hardware executive and likely CEO-successor has been indicted on charges of insider trading that may land him a prison sentence.  But he isn't alone.  Also receiving indictments were Rajiv Goel, a managing director of Intel subsidiary, Intel Capital and Anil Kumar, a director at consulting firm McKinsey & Co. and advisor to AMD.  The trio were among six top executives targeted in the case, which federal prosecutors are calling the biggest to date.

The trio from Intel, IBM, and AMD's advising firm reportedly used their insider insight to help a high profile investor gain more than $25M USD in ill-begotten profits between 2006 and 2009, trading Advanced Micro Devices, Akamai, Clearwire, Google, Hilton, Polycom, and Sun Microsystems, among others.  Some of the defendants apparently broke the law for kickbacks, others, such as Mr. Moffat, out of friendship. 

The feds reportedly caught the defendants in their carefully crafted and timed insider trades, thanks to wiretaps of their phone conversation.  And insider informant also reportedly played a pivotal role.  The investigation culminated in the arrest of the six primary players last week.

According to the feds, on January 8, 2007, billionaire investor and founder of the Galleon Group Raj Rajaratnam contacted Intel's Goel seeking inside information.  Mr. Goel was more than happy to oblige, indicating that share prices would likely be rising over the next couple days.  The next day Mr. Rajaratnam followed the inside tip and bought 1 million shares of Intel stock.  On January 11 he loaded up with 500,000 more shares.

Then on January 16, Mr. Rajaratnam sold all of his Intel stock, pocketing a $1M USD profit.  Later that day Intel earnings were reported and failed to excite, plunging the share prices 5 percent.  However, Mr. Rajaratnam and his Intel contact had beat the system -- or so they thought.

Mr. Goel wasn't finished, though.  He also allegedly tipped Mr. Rajaratnam off about an impending deal between Clearwire and Sprint.  An early purchase was enough to score another $750,000 in profits.  Mr. Rajaratnam returned the illegal love, executing insider trades for Mr. Goel on Hilton and PeopleSupport stock which handed the Intel executive $250,000 in profits.

The story was similar for Robert Moffat, an IBM golden boy.  The well-liked executive was close friends with Danielle Chiesi, an executive of the hedge fund New Castle Partners.  During a courtship of Sun, IBM got access to Sun's upcoming tax information.  And Mr. Moffat leaked this information to Ms. Chiesi. She pocketed $1M USD when shares later soared upon the official release of Sun's good financial news.

AMD's stock was another tied into the illegal trades.  Galleon reportedly made $9.5M USD off its stock after receiving inside tips from Anil Kumar, who had knowledge of how the company would be offloading much of its semiconductor manufacturing capabilities in mid 2008.  In the end, though, justice was at least served on these gains, somewhat, by the market -- they were almost entirely wiped out when the recession hit in full.

Robert Khuzami, director of the SEC’s enforcement division concludes, "What we have uncovered in the trading activities of Raj Rajaratnam is that the secret of his success is not genius trading strategies. He is not the astute study of company fundamentals or marketplace trends that he is widely thought to be. He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity."

The investigation of these illegal dealings is far from over.  Meanwhile, the accused vow to fight the government's charges in U.S. District Court for the Southern District of New York.  In the meantime Mr. Goel has been placed on leave from Intel, pending the investigation.  IBM declined comment about its star executive or what actions it might take.



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

HA HA!!!
By Iaiken on 10/19/2009 10:50:38 AM , Rating: 4
Just had to laugh...

That is all...




RE: HA HA!!!
By amanojaku on 10/19/2009 10:58:18 AM , Rating: 3
Seriously.
quote:
In a move that could rock the electronics industry, "classic IBM executive" Robert Moffat, IBM's highest ranking hardware executive and likely CEO-successor has been indicted on charges of insider trading that may land him a prison sentence.
If this is true then Moffat is among the biggest fools on the planet. A little bit of greed is all it takes to ruin your career for life, and at 53 he's not a young man. Career-wise he may never recover.


RE: HA HA!!!
By Totally on 10/19/2009 11:02:07 AM , Rating: 2
So, seriously what the worst that can happen to these guys get fined, spend some time at the government day spa early, after that early retirement on some beach in nassau?


RE: HA HA!!!
By weskurtz0081 on 10/19/2009 12:00:44 PM , Rating: 5
They're not going to some white collar resort prison. No, no, no! They're going to Federal POUND ME IN THE A** prison!


RE: HA HA!!!
By Cypherdude1 on 10/19/2009 9:29:44 PM , Rating: 4
quote:
If this is true then Moffat is among the biggest fools on the planet. A little bit of greed is all it takes to ruin your career for life, and at 53 he's not a young man. Career-wise he may never recover.
I agree. This was an incredibly idiotic, greedy move on Robert Moffat's part. Now instead of becoming IBM's CEO, he'll at minimum get fired because of all the bad publicity. Going to jail is something else. The super rich always hire their lawyers and can get off. Even Enron's Jeffrey Skilling is having his case heard before the Supreme Court!!! Moreover, Skilling is having his 20+ year sentence reviewed (downward)!!! The difference between the rich and/or powerful and the rest of us is they have many more chances than we do to get off. One perfect example is Marc Rich. Marc Rich is a billionaire who was living in Switzerland when he was federally indicted. His ex-wife gave the Clintons hundreds of thousands and on the last day of Clinton's presidency, Rich got a pardon:
http://en.wikipedia.org/wiki/Marc_Rich

Raj Rajaratnam could have dual Sri Lankan citizenship. Because he is a billionaire, he could easily flee the USA the same way Roman Polanski did in 1978:
http://en.wikipedia.org/wiki/Raj_Rajaratnam
http://en.wikipedia.org/wiki/Roman_Polanski

Only now, 30 years later, is Polanski being held in Switzerland for extradition. Speaking of Roman Polanski, there are many rich influential people in the USA, who also give money to the Democratic Party and Democratic Presidential candidates, who are calling for Polanski's release. Guess who the Secretary of State is, none other than Hillary Clinton. The State Department could easily not pursue Polanski's extradition (too hard). ;^D

BTW, this insider trading story actually occurred on Friday, 10/16/2009, not today. Until I looked on Wikipedia, I was expecting to turn on the national news broadcast and see footage. I guess I missed it.


RE: HA HA!!!
By crystal clear on 10/20/2009 5:47:16 AM , Rating: 2
quote:
Raj Rajaratnam could have dual Sri Lankan citizenship. Because he is a billionaire, he could easily flee the USA the same way Roman Polanski did in 1978:


Yes if he did that,he gets himself some more years added on to his jail sentence,for fleeing the USA.

In addition, by now all his assets/offices/bank accounts etc are frozen- nobody can touch them & his passports confiscated.

Switzerland & other similar countries are no more safe havens - the U.S. now have access to bank account numbers/details of all U.S. citizens holding accounts there.

Switzerland is no more interested in protecting criminals fleeing justice,they stand to loose rather than gain from allowing criminals inside the country.

Drug trafficing money that found its way to Switzerland has done severe damge to its reputation.

Switzerland's image is severly tarnished due to their secrecy laws & other laws protecting criminals.

Example- Madoff the ponzi schemes fame, got his trial really fast....times are changing.

As for Sri Lanka they want him for possible funding the Tamil Tigers...

Yes Gadafi with his female body gaurds, from Libya will give him a grand welcome...


RE: HA HA!!!
By weskurtz0081 on 10/20/2009 11:29:46 AM , Rating: 2
BTW, in case you didn't know, what I put in there was a quote from Office Space, the line the guy in the picture above said.


RE: HA HA!!!
By Donkey2008 on 11/3/2009 12:49:06 AM , Rating: 2
What exactly are you getting at with the blind accusations that rich Democrats want Polanski released? If you have names, then list them, but please stop making everyone on this board dumber with the Faux News-style insinuations that have no factual merit.


RE: HA HA!!!
By dsraa on 10/19/2009 11:17:26 AM , Rating: 3
Umm...trust me...he is WELL off. You know how much he makes? (350k)Even if he got sued, he makes enough that he could goto jail for the next 20 years, and his whole family and he can retire, and they would be fine. He's not worried, and neither is IBM. They'll just layoff 5000 more people and act like they are doing well, just like the last 2 layoffs. Seriously, go look it up....especially in Q1 2009.


RE: HA HA!!!
By Midwest Guy on 10/20/2009 7:07:30 AM , Rating: 2
You are correct. IBM just uses layoffs to keep their profit margins high. Moffat is a jacka$$. He was in charge when they outsourced the entire card line in Rochester, myself included. They sent it to a canadian company who ended up selling it to someone else 6 years later. 13 years wasted. I hope they hang him by his sack.


RE: HA HA!!!
By monomer on 10/19/2009 3:54:09 PM , Rating: 3
The sad part is, is that the entire take was $25 million. While that is a lot of money, it is definitely not worth ruining your career for, considering Moffat could make that much in a year if he were to become CEO of IBM.


RE: HA HA!!!
By Drag0nFire on 10/19/2009 3:59:15 PM , Rating: 2
It's a pity, really, that such a great career will be ruined by such a stupid mistake... particularly since he didn't benefit from it.


RE: HA HA!!!
By lco45 on 10/19/2009 7:08:48 PM , Rating: 2
I'm finding it hard to judge Moffat too harshly, if he did it for friendship.

I mean, put yourself in his position, and picture one of your friends.
If you knew of a sweet deal in the pipeline and you were having a beer with your friend, I know I would think about giving my friend a tip-off.

Luke


RE: HA HA!!!
By superPC on 10/19/09, Rating: 0
RE: HA HA!!!
By FITCamaro on 10/19/2009 12:24:38 PM , Rating: 2
Yeah....that would also destroy the stock market.


RE: HA HA!!!
By superPC on 10/19/09, Rating: -1
RE: HA HA!!!
By Yawgm0th on 10/19/2009 1:16:17 PM , Rating: 2
quote:
isn't this better for all of us?
No.


RE: HA HA!!!
By Steve1981 on 10/19/2009 1:34:00 PM , Rating: 2
quote:
isn't this better for all of us?


I sympathize with your desire to stop insider trading, but your solution is akin to curing a cold by drinking a gallon of bleach.

Lets try a scenario:

You invest in Company X after diligent research on the company's finances and outlook. Six months from now, due to no fault of its own, Company X loses two key contracts. It's stock price plunges and you lose confidence in your investment. Should you be forced to hold it, or should you be allowed to sell it to someone with a more optimistic outlook than yourself?


RE: HA HA!!!
By aharris on 10/19/2009 2:26:10 PM , Rating: 4
quote:
it might destroy the stock market, but


Critical thinking should kick in right about... ^there.


RE: HA HA!!!
By jonup on 10/19/2009 1:30:33 PM , Rating: 1
Do you realize that you are trying to explain this to someone that is asking for regulations?


RE: HA HA!!!
By WW102 on 10/19/09, Rating: 0
RE: HA HA!!!
By dark matter on 10/19/2009 3:26:40 PM , Rating: 1
Because Capitalism is broken you idiot.


RE: HA HA!!!
By stilltrying on 10/19/2009 5:56:09 PM , Rating: 1
Gov regulated, picked on, inspected in, proded at capitalism. There has never been a free market in the US ever period. Remove the Federal Reserve (fiat money) and have money of substance not computer and paper money (monopoly)and most of the worlds problems would disappear.


RE: HA HA!!!
By jonup on 10/19/2009 8:09:33 PM , Rating: 3
Most opponents of the fiat money tend to believe in the gold standard. Allow me to disagree with them, but a commodity linked currency is way more vulnerable than electrically created money, regulated by a sizable group of very knowledgeable economist. Yes, they try to maintain economic stability and do not act in someone’s private interest. And yes, I am aware (read/seen) of the conspiracy theories floating around about the Fed. They are very entertaining and believable, especially to people that do not have advanced economic and especially financial knowledge/background.


RE: HA HA!!!
By myhipsi on 10/20/2009 8:58:03 AM , Rating: 3
The problem with fiat currency is it's dilution through printing money and monetizing debt. The unrepresented "tax" of inflation is the result, and so is a government that continues to grow and expand while making the average citizen poorer. If the currency was tied to a commodity like gold for example, the ability to expand government in bad economic times would be impossible, and the citizens wouldn't loose the value of their savings though inflation, not to mention government waste.

quote:
[The Fed doesn't] act in someone’s private interest


How about the revolving door between the Treasury, Fannie Mae, the Fed banks and Wall Street firms. Do a little research and you'll find that not every suspicion about the fed is a "conspiracy theory".

What about the bill HR1207 (The federal reserve transparency act 2009) which currently has 303 co-sponsors in the house, are these people conspiracy theorists too? Ever since the fed has been in existance there has been a never ending cycle of booms and busts with a government that keeps growing at an exponential rate. Interest rates have been all over the place and are currently artificially low by a wide margin. Inflation has been a constant force since the fed's inception and debt (public and private) has spiraled out of control. Maybe it's time to shed some light on the fed and return to a sound currency.


RE: HA HA!!!
By jonup on 10/20/2009 10:55:24 AM , Rating: 1
quote:
The problem with fiat currency is it's dilution through printing money and monetizing debt.

Well, monetiring debt is on of the ways the Fed tries to maintain its goals. And it does not only buy debt but it also sells the debt and as a matter of fact that is how it maintains it effective interest rates. Do not think of it as one way traffic. It is not.
quote:
The unrepresented "tax" of inflation is the result,...

Maintaining low inflation is one of the three major goals of the Fed, and they have to testify to Congress twice a year on these three goals (Amendment of 1978). So blaming the Fed for inflation is laughable.
quote:
...and so is a government that continues to grow and expand while making the average citizen poorer.

This is an effect of the capitalism. It is not a responsibility of the Fed to maintain social distribution of wealth.
quote:
If the currency was tied to a commodity like gold for example, the ability to expand government in bad economic times would be impossible, and the citizens wouldn't loose the value of their savings though inflation,

There is a lot that's wrong with gold standard and that's why it is not use today. With limited supply of money, increase in the real GDP (even simply due to population increase at 20thy century rates) would lead to uncompetitive currency appreciation that will suffocate the economy. On a supply side what would be the result of a commodity (gold) discovery that would easily double the amount of gold in the system. With a gold standard the value of the dollar will be uncontrollable. Not a good thing.
quote:
not to mention government waste.

I can't agree more on that.
quote:
How about the revolving door between the Treasury

The Act of 1951 was implemented to separate Treasury from the Fed.
quote:
Fannie Mae, the Fed banks and Wall Street firms.

If you are talking about the 2008 bailout, the Fed was created as a lender of last resort and that's what they did. If they did not act you would have been dreaming for a 10% unemployment right now.
quote:
which currently has 303 co-sponsors in the house, are these people conspiracy theorists too?

Well if you listen to some of the congressional hearings of the current Fed Chair, you would understand the economic and financial literacy of the house. On the other hand it is really easy to convince the politicians and the people that extreme measures are necessary. Prime example is the wars we end up spending our tax money in after 911. They new Saddam had weapons of mass destruction, or did they?
I do not excuse the Fed from their responsibilities. They did not do effective monitoring prior to the financial crisis and there should be a reform to prevent that from happening. On the other hand full transparency would have adverse effect on the financial markets.
quote:
Ever since the fed has been in existence there has been a never ending cycle of booms and busts

Well there had "been a never ending cycle of booms and busts" prior to the Fed Act of 1913. (Which is unconstitutional but not according to the court precedents, "sarcasm"). The Great Depression followed a world economic crisis with Germany having six-digit hyper-inflation. And at that time US economy was not as important as it is today. Was the Fed responsible for the severity? Yes. They should have acted as they were meant to and they did not.
quote:
Interest rates have been all over the place and are currently artificially low by a wide margin.

In the early years of the Fed, they try and did maintained artificially low interest rates. They found it the hard way that it is not a good thing.
quote:
Maybe it's time to shed some light on the fed and return to a sound currency.

A gold standard currency is anything but not sound. And for many reasons.
And I am not trying to be offencive, but before I need to go do a little research you need to go do a lot of studying. As I said I do watch and read Fed conspiracies but what they lack is sound economical/financial background.


RE: HA HA!!!
By jonup on 10/19/2009 7:56:45 PM , Rating: 2
US economy is the largest economy and got there due to capitalism. And if that is not enough, take a look at capitalistic China. And then look at what social governments have done to Germany and UK. It is so bad, I do not want to go back to Europe. So before you start throwing bricks at the capitalism think of a better historically successful regime.
Unfortunately, we are all gonna be ether in jail or equal thanks to increasing number of people like you.


RE: HA HA!!!
By olafmetal on 10/19/2009 10:42:03 PM , Rating: 4
"capitalistic China"? Their government is run by the communist party, their industrial infrastructure was built by the state, most of the largest Chinese companies are state owned, their government is highly oppressive and yet they are more capitalistic then Europe?

For those who are dreaming of a economic system free of government influence you should study the history of the Dutch East India company and their holdings. They did manage to bring in a yearly profit of over 18% for a couple of centuries but there was certainly a human cost and plenty of evidence that private industry can be every bit as corrupt and inefficient as any government.


RE: HA HA!!!
By jonup on 10/20/2009 11:14:11 AM , Rating: 2
quote:
Their government is run by the communist party,... their government is highly oppressive and yet they are more capitalistic then Europe?

Do not confuse democracy with capitalism.
quote:
most of the largest Chinese companies are state owned,

Then how do you explain that the amount of bellionaires if the companies are state owned and the government gets the profits? China has restriction on foreign ownership. Corruption and the party are very interrelated with the private sector, I agree. But that is a result of the totalitarian regime. On the other hand, there are a lot of poor people and very rich (from treir business) ones.


RE: HA HA!!!
By weskurtz0081 on 10/20/2009 1:12:14 AM , Rating: 2
How exactly is capitalism broken?


RE: HA HA!!!
By Midwest Guy on 10/20/2009 7:16:15 AM , Rating: 2
Socialism IS Communism.


RE: HA HA!!!
By jconan on 10/19/2009 11:41:36 PM , Rating: 1
but that would also lead to company irresponsibility i.e. company A's CEO was fiscally irresponsible or complacent. The company's irresponsibility or lack of fiduciary ethics is all over the news. An investor has just invested in the company almost all his life savings and is retiring in a few months. Now since the stocks are down and it is likely the company may not last and now the investor can not sell or reinvest because of the 2 year limit? That 2 year holding is not well thought out and there are quite a bit of those scenarios that your plan would not have worked.


"Female friend"
By Jansen (blog) on 10/19/2009 11:11:02 AM , Rating: 5
It's always the "female friend" that gets you...




RE: "Female friend"
By mmcdonalataocdotgov on 10/19/2009 11:18:25 AM , Rating: 5
It's not so much the female friend as the male friend in his pants that got him.


RE: "Female friend"
By davekozy on 10/20/2009 4:17:24 AM , Rating: 2
I'd like to show her some insider trading.;)
I'm sure this goes on all the time between high ranking executives. It's just that their smart enough to talk about it in person or over encrypted e-mails.
The rich get richer and the poor get government handouts.


crumbs
By Uncle on 10/19/2009 2:06:53 PM , Rating: 3
Every once in awhile the justice department throws a few crumbs to the public to make it look like justice is being done and were being protected from these swine and their ill gotten gains. Guess what their only stealing from others that are trying to flip stock for a quick gain. This is just the tip of the iceberg the justice dept. don't have the money to go after everyone. Similar to the RIAA and MPIAA. Out of the millions that could be trying out songs or software they get a few thousand that can't afford lawyers.




RE: crumbs
By NaughtyGeek on 10/19/2009 4:20:28 PM , Rating: 2
As stated, crumbs. Enough to lull the masses into believing they're being looked out for. Let's see some investigations into Goldman Sachs, AIG, or Merrill Lynch executives. Oh yeah, never mind, they've paid their dues.


RE: crumbs
By Midwest Guy on 10/20/2009 7:20:20 AM , Rating: 2
Damn Straight!


RE: crumbs
By Beno on 10/19/2009 6:58:33 PM , Rating: 2
quote:
director of the SEC’s enforcement division concludes, " What we have uncovered in the trading activities of Raj Rajaratnam is that the secret of his success is not genius trading strategies . He is not the astute study of company fundamentals or marketplace trends that he is widely thought to be. He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity."

what about warren buffet? when i read that paragraph he poped into my mind. i dont know why.


The South Asia connection
By crystal clear on 10/19/2009 12:50:29 PM , Rating: 3
Rajaratnam, Kumar and Goel all from India & or connected directly/indirectly with this bussiness school.

Insider trading case puts Indian business school in spotlight

BANGALORE (Reuters) - The Indian School of Business, backed by some of the leading global companies, has been dealt another black eye with an executive board member charged over the largest hedge fund insider-trading scheme.

Among those charged, Anil Kumar, a director at consulting firm McKinsey & Co., is on the executive board of the Indian School of Business (ISB), a premier management institute which was placed second among Asia's business schools this year.



http://www.reuters.com/article/ousivMolt/idUSTRE59...

Did Rajaratnam's money find way to Tamil Tigers?

COLOMBO (Reuters) - A Sri Lankan-born billionaire's arrest in the largest U.S. hedge fund insider trading case triggered new scrutiny on Monday in his native country over the possibility his money found its way to the Tamil Tiger rebels.



http://www.reuters.com/article/ousivMolt/idUSTRE59...




RE: The South Asia connection
By Taft12 on 10/19/2009 3:05:18 PM , Rating: 2
Wow, insider trading is a heinious crime, but a terrorist supporter? We'll find out just how good those expensive lawyers are....

Thanks for the info.


RE: The South Asia connection
By totallycool on 10/20/2009 1:27:05 PM , Rating: 2
quote:
Rajaratnam, Kumar and Goel all from India & or connected directly/indirectly with this bussiness school.


Hi Just want to clear something up, Rajaratnam is from Sri lanka and not India.


Word of advice...
By phu5ion on 10/19/2009 2:06:06 PM , Rating: 1
Kick someones ass the first day, or become someones bitch.




RE: Word of advice...
For friendship or for sex?
By nZone on 10/20/2009 9:09:56 AM , Rating: 2
Sex overpowers greed.




"I f***ing cannot play Halo 2 multiplayer. I cannot do it." -- Bungie Technical Lead Chris Butcher

Related Articles













botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki