Former IBM Exec Moffat Handed Six Month Jail Sentence

The former high flying IBM executive, Robert Moffat, has been sentenced to six months in prison for his role in a massive $25 million (£16 million) insider trading scandal.

Moffat, who had spent 31 years with the technology giant and was senior vice president and group executive of IBM’s $20 billion (£13 billion) Systems and Technology Group at the time of his arrest in October 2009, admitted that he had passed on information about IBM’s finances, Lenovo’s financial earnings and Advanced Micro Devices’ efforts to spin off its manufacturing business to create what is now Globalfoundries to a friend, Danielle Chiesi, a portfolio manager with hedge fund New Castle Funds.

Chiesi is a key figure in the insider trading case that roped in more than two dozen people, including some executives with technology companies.

Probation Denied

Moffat, who no longer is with IBM, pleaded guilty in March to securities fraud and conspiracy charges. He had asked for a sentence of probation, a request that was denied by US District Court Judge Deborah Batts during a hearing in a Manhattan courtroom.

Batts reportedly said Moffat’s crimes were as harmful as violent offences.

“White-collar crime is just as destructive to our social fabric as the crimes of drugs and violence,” Batts said, as quoted by Bloomberg News. “There is a need in the sentence imposed to promote respect for the law.”

Batts said Moffat will have to pay $50,000 (£32,000) after he is released from prison, and questioned why Moffat, who some had said was a candidate to become CEO after Sam Palmisano retires, would commit such acts.

“Why the defendant betrayed the only employer he has had for his entire career has not been addressed,” Batts said. “His astounding breach of his fiduciary duty to his employer is why he is here.”

Terrible Mistake

At his sentencing hearing, Moffat said he had no one to blame.

“Your honour, I made a terrible mistake in judgment which will haunt me for the rest of my life,” he reportedly said. “What I did was wrong. I alone am responsible for my conduct.”

Moffat’s lawyer, Kerry Lawrence, said Moffat is not co-operating with the investigation, according to Bloomberg.

Bloomberg also said Assistant US Attorney Andrew Michaelson said during the hearing that Moffat’s actions damage the reputation of the market, giving people the belief that the “markets are rigged.”

Michaelson argued, “When the market is harmed, the economy is harmed and we are all harmed. That is what makes the crime of Mr. Moffat’s so acute.”

Moffat admitted to having a personal relationship with Chiesi, but said in a story in Fortune magazine in July that the relationship was about business more than sex, despite allegations of a physical relationship.

He was arrested after being caught by a federal wiretap giving information to Chiesi.

Hedge Fund Players

Chiesi and Raj Rajaratnam, co-founder of the Galleon Group hedge fund group, are the central figures in the case, in which they are accused of making millions of dollars in illegal stock trades based on the insider information from Moffat and others. Both have denied the charges and face trial in 2011.

Other technology executives implicated in the case include Rajiv Goel, a former official with Intel’s treasury group, and former AMD CEO Hector Ruiz. Goel, who no longer is with Intel, pleaded guilty in February to charges involving the leaking of information about Intel and Clearwire to Rajaratnam.

Chiesi also is accused of getting information from unnamed sources, and several news sites have said Ruiz was one of those people. Ruiz has not been charged with a crime, though the Fortune story said he was under investigation by federal authorities in connection with his dealings with Chiesi.