Six o'clock local time last Friday was CEO Raj Rajaratnam in hedge fund Galleon Group arrested at his home in Manhattan, a few hours before he was to take the plane to London. Rajaratnam, one of America's richest men, is accused of insider trading in a case that United States federal law enforcement the FBI describes as the biggest insider trading scandal on Wall Street since the 1980s.
Five others were arrested along with Rajaratnam, among them Robert Moffat, 53-year-old senior vice president of IBM, with the position as Group Executive, Systems and Technology Group ", that is responsible for IBM's top investment in hardware.
Moffat described as "ur-IBM-is": He joined the company in 1978, worked his way slowly upward in the hierarchy. He is perceived as one of the chief executive Sam Palmisano's confidante, and has been mentioned as a possible successor to Palmisano.
Professor at Harvard Business School, Rosa Beth Moss Kanter, "says the Wall Street Journal that she is" amazed "over the arrest, given IBM's value-based culture, which she emphasizes the example to emulate that in a thorough study of several successful U.S. corporations, published under the title Super Corp..
Indictment against the six arrested yesterday on illegal conspiracy to make money from trading with securities. Rajaratnam is described as the main character, and to have earned up to 20 million for his hedge fund, based on inside information obtained from a wide network of contacts. Galleon Group has concentrated especially on technology companies, and have earned good money on the purchase and sale of shares in, among other things, Google, Akamai, and AMD.
Two of those arrested, Mark Kurland and Danielle Chiesi, are former managers of Bear Stearns, the investment bank that triggered the financial crisis as they went down last year. Kurland and Chiesi went to the hedge fund New Castle, and to have earned large amounts of including Sun and IBM shares to collect and share inside information with Rajaratnam and Galleon Group.
The last two arrested are former Intel employee Rajiv Goel and McKinsey consultant Anil Kumar.
According to the indictment against Goel he will have made contact with Rajaratnam in March 2008 to offer tips on an Intel investment in WiMAX company, Clear Wire, to help to get a better job. Information from Goel should have made it possible for Rajaratnam to realize a gain of 579 000 dollars in trade with Clear Wire-shares.
Kumar from McKinsley was hired by AMD to work with the company's reorganization. He himself was an investor in the Galleon, and should have given both Rajaratnam and Chiesi in New Castle tips on Akamai and AMD.
The role of IBM-shoulder Moffat will primarily have been to keep Chiesi abreast of internal developments in IBM and the close partner AMD, and tip her at the forefront of developments in the Sun that he learned about through negotiations between Sun and IBM last winter, which resulted in IBM's offer to buy the Sun in March this year. New Castle should have earned at least 1.4 million U.S. dollars on these tips: indictment mentions a trade with the Sun-shares with a gain of 900 000 dollars, and trading in IBM shares with a gain of 500 000 dollars.
Moffat will personally not have earned anything on the tips of Chiesi.
IBM has refused to comment on the indictment against Moffat, and will not say anything about his current relationship with the company. His official biography and image is removed from the IBM Web site, and are not available through Google cache.
Moffat came into the international spotlight in 2000 when he was responsible for IBM's PC division. He used a half years to restore profitable operations. Three years later he initiated and organized the sale of the PC division to the Chinese state-owned company Lenovo.
Much of the evidence against Moffat and the other arrested and indicted in the case based on tapped phone conversations. It is published, contains several juicy lines and sequences that link the sale and purchase of shares in various companies to inside information. Other evidence is evidence that stands up in exchange for reduced punishment. Moffat indictment describes as a "friend" by Chiesi.
