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Former IBM Executive Robert Moffat Jr. Sentenced to Six Months in Jail

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Ostracized by his IBM colleagues, Moffat receives comfort from an ailing wife who remains by his side during cheating and insider-trading scandal.

 

Tears streaming down his face, contrite former IBM executive Robert W. Moffat Jr. pleaded to no avail with federal Judge Deborah Batts to spare him a jail sentence, but the judge would have none of it. She ordered him to serve six months behind bars for his role in the insider-trading scandal that rocked IBM's corporate world and involved large-scale corruption on Wall Street estimated to have generated some $20 million in illegal profits.

 

Moffat, 54, of Ridgefield, Connecticut, former senior vice president and general manager of IBM's Systems and Technology Group, was sentenced Monday, September 13, to six months in jail as part of a plea bargain with federal prosecutors, who felt he should do at least some jail time and recommended as much to the judge. According to reports in the New York Daily News, Moffat's personal wishes were taken into consideration by the judge, who will let him remain free on bail until June 30, 2011, in order to spend the holidays with his family and attend his son's graduation in May.

 

Otherwise, Judge Batts was unsympathetic to Moffat and gave him the maximum under the plea agreement. She lectured him that, "White collar crime is just as destructive to our social fabric" as other types of crimes, according to reports in the Daily News.

 

Moffat's motivation for sharing insider information about IBM and other technology firms with Danielle Chiesi, 43, a New York consultant at New Castle Funds, apparently was not financial, according to published reports. Moffat is reported to have had an "intimate, personal relationship" with Chiesi, whom he later turned on and accused of "playing" him. The charge elicited a series of provocative headlines in New York's media, including the New York Post's "IBMer says hedge hottie 'played him' " and the New York Times' "Moffat: His Mistress Made Him Do It."

 

"Your honor, I made terrible mistakes in judgment, which will haunt me for the rest of my life," the Daily News quoted Moffat as telling Judge Batts at sentencing. His voice cracking with emotion and his face wet with tears, Moffat anguished that, "What makes this so painful to me is the knowledge that my actions hurt my wife, my children, my brothers and sister, friends, colleagues at IBM—all of whom put their trust and confidence in me," the Daily News quoted him as saying. According to the Associated Press, Moffat lamented he has been ostracized by former friends and colleagues at IBM and lost out on $65 million in benefits he probably would have received had he been able to remain with the company. Moffat at one time was seen as a possible candidate to lead the company.

 

Moffat told the judge that if the humiliation and the loss of dignity and his reputation, as well as significant financial loss, weren't bad enough, the stress from the prosecution has exacerbated his wife's multiple sclerosis, a degenerative nerve disease. Apparently his wife, Amor, has stayed by his side throughout the ordeal, and Moffat publicly expressed gratitude in court for her loyalty.

 

In a letter submitted to the court pleading with the judge to grant her husband probation rather than prison time, Amor Moffat said that she did "not regret the choices I've made in staying with Bob, both in support of him as a person, and as a wife who still firmly believes in and loves her husband" reported Bloomberg news. Mrs. Moffat said that she is "able to look beyond the pain of betrayal and stand firmly by his side in support."

 

Moffat escaped the full force of the prosecution's wrath and could have spent 25 years behind bars if convicted at trial. He was accused of passing insider information to Chiesi in an attempt to help a woman from whom he was receiving sexual favors. He is the 11th person to plead guilty in the insider-trading scandal that involved the Galleon Group, a $7 billion hedge fund, and New Castle, equity hedge fund group of Bear Stearns Asset Management, Inc., now part of JPMorgan Chase. Not all of those charged, however, are pleading guilty. Galleon founder Raj Rajaratnam and Chiesi have chosen to fight the charges and are awaiting trial.

 

Besides Chiesi and Rajaratnam, among the others who were charged in the investigation are Rajiv Goel, 51, Los Altos, California, former director of strategic investments at Intel Capital (the investment arm of Intel Corp.); Anil Kumar, 51, Santa Clara, California, former director at McKinsey & Co., Inc., a global management and consulting firm; and Mark Kurland, 60, of New York City, a top executive of New Castle.

 

Rajaratnam is reported to be one of the richest men on earth, ranked by Forbes as No. 559 on its 2009 list of billionaires and worth an estimated $1.3 billion. His bail was set at $100 million, and he was ordered to stay within 110 miles of New York City by U.S. Magistrate Judge Douglas F. Eaton. Rajaratnam was charged with conspiring to use insider information on companies that included Google, Sun Microsystems, AMD, and IBM, among others. The Sri Lankan–born financier is also reportedly under scrutiny for a possible connection to the financing of Sri Lankan militants notorious for suicide bombings, according to the Associated Press as quoted in the Daily News.

 

"He's innocent, and we're going to fight the charges," said Rajaratnam's attorney Jim Walden. Rajaratnam and Kumar also may face civil charges filed by the Securities and Exchange Commission, which has also named 21 additional defendants in its civil suit emanating from the case. Investigators are calling this the largest hedge fund insider-trading case in history, reportedly generating nearly $20 million in illegal profits for Galleon.

 

Meanwhile, the uncertainty is over for Moffat, who now has nearly a year to prepare himself before beginning to serve his half-year in jail.

as/400, os/400, iseries, system i, i5/os, ibm i, power systems, 6.1, 7.1, V7,

Chris Smith

Chris Smith was the Senior News Editor at MC Press Online from 2007 to 2012 and was responsible for the news content on the company's Web site. Chris has been writing about the IBM midrange industry since 1992 when he signed on with Duke Communications as West Coast Editor of News 3X/400. With a bachelor's from the University of California at Berkeley, where he majored in English and minored in Journalism, and a master's in Journalism from the University of Colorado, Boulder, Chris later studied computer programming and AS/400 operations at Long Beach City College. An award-winning writer with two Maggie Awards, four business books, and a collection of poetry to his credit, Chris began his newspaper career as a reporter in northern California, later worked as night city editor for the Rocky Mountain News in Denver, and went on to edit a national cable television trade magazine. He was Communications Manager for McDonnell Douglas Corp. in Long Beach, Calif., before it merged with Boeing, and oversaw implementation of the company's first IBM desktop publishing system there. An editor for MC Press Online since 2007, Chris has authored some 300 articles on a broad range of topics surrounding the IBM midrange platform that have appeared in the company's eight industry-leading newsletters. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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