Systems and Technology Group has change of leadership as Moffat is put on indefinite leave.
IBM executive Robert W. Moffat Jr. has been placed on an indefinite leave pending the outcome of charges filed against him and five others Friday in connection with an alleged illegal insider trading operation.
Moffat, 53, of Ridgefield, Conn., a senior vice president and general manager of the Systems and Technology Group, and a rising star at IBM whom some said was in line for the company's top job as the next chief executive officer, was arrested and released on $2 million bail following a federal undercover investigation that had tentacles extending into Intel Corp., a large Wall Street hedge fund, and a global management and consulting firm.
Rod Adkins has been named acting head of IBM's Systems and Technology Group. He currently had been senior vice president for development and manufacturing at STG. Meanwhile, Moffat's profile has been removed from IBM's Web site, and the company said he no longer is a company officer.
Others charged in the case include Raj Rajaratnam, 52, founder of the $7 billion Galleon Group hedge fund; Rajiv Goel, 51, Los Altos, Calif., director of strategic investments at Intel Capital (the investment arm of Intel Corp.); Anil Kumar, 51, Santa Clara, Calif., a director at McKinsey & Co., Inc., a global management and consulting firm; Danielle Chiesi, 43, New York City, an employee of New Castle, the equity hedge fund group of Bear Stearns Asset Management, Inc., now part of JPMorgan Chase; and Mark Kurland, 60, New York City, a top executive of New Castle.
Bail set in the case by U.S. Magistrate Judge Douglas F. Eaton was high. Rajaratnam, one of the world's wealthiest individuals and a frequent Democratic campaign contributor, who reportedly was central to the alleged conspiracy had bail set at $100 million. Prosecutors requested that he not be granted any bond because of his wealth and frequent global travel. Kumar had bail set at $5 million, Kurland's bail was set at $3 million, and Chiesi's and Moffat's at $2 million.
Profits from the alleged trading scam exceeded $20 million and involved using insider information to trade securities in several publicly traded companies including Google, Polycom, Hilton Hotels, IBM, Sun Microsystems, Intel, Advanced Micro Devices, as well as the stocks of Clearwire, and Akamai.
Moffat allegedly provided insider information to Chiesi at the time IBM was considering acquiring Sun. She allegedly then made trades on behalf of New Castle Funds based on the tips that subsequently generated about $1 million in profits, according to IDG News Services.
Criminal charges against the six included conspiracy and securities fraud and the group also is facing civil charges filed by the Securities and Exchange Commission relative to alleged insider trading.
Investigators said the defendants benefited from tips about the earnings, earnings guidance and acquisition plans of various companies. Sometimes those who provided tips received financial benefit, but sometimes they traded tips only for more inside information, according to U.S. Attorney Preet Bharara.
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