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Ex-IBM Exec Gets 6 Months In Prison

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Former senior vice president of IBM Robert Moffat enters Manhattan federal court for his sentencing, Monday, Sept. 13, 2010, in New York. Moffat  pleaded guilty for his role in the Galleon Group insider trading case. (AP Photo/ Louis Lanzano)

Former senior vice president of IBM Robert Moffat enters Manhattan federal court for his sentencing, Monday, Sept. 13, 2010, in New York. Moffat pleaded guilty for his role in the Galleon Group insider trading case. (AP Photo/ Louis Lanzano)

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NEW YORK (AP / WCBS 880) – A tearful former IBM executive who has admitted that romance clouded his judgment was sentenced to six months in prison Monday for his role in what prosecutors call the biggest hedge fund insider trading case in history.

LISTEN: WCBS 880’s Irene Cornell reports

Robert Moffat, 54, of Ridgefield, Conn., was also ordered to pay a $50,000 fine by U.S. District Judge Deborah A. Batts following his guilty plea earlier this year to securities fraud and conspiracy to commit securities fraud.

“White collar crime is just as destructive to our social fabric as the crimes of drugs and violence,” the judge said as she sentenced Moffat at the top of a federal sentencing guidelines range that stretched from no jail time to six months in prison.

Afterward, U.S. Attorney Preet Bharara issued a statement saying the sentence showed that “even high-flying executives do not receive get-out-of-jail-free cards.”

The sentence came in a case that resulted in charges against 21 defendants last fall. Already, a dozen people have pleaded guilty. Charges against Moffat drew increased attention because he was a high-level executive at Armonk, N.Y.-based International Business Machines Corp., where he once was considered a candidate for chief executive officer during a three-decade career.

Authorities say profits from illegal trades topped $50 million, though Moffat’s tips resulted in no profits and he received no money, lawyers on both sides agreed.

Instead, Moffat was motivated by a desire to impress fellow defendant Danielle Chiesi, with whom he had an affair, his lawyers acknowledged in court papers prior to the sentencing. They said she “played” him by using their intimate relationship to get confidential information.

Before he was sentenced, Moffat apologized, saying he “made a terrible mistake in judgment which will haunt me the rest of my life.”

Assistant U.S. Attorney Andrew Michaelson requested a six-month sentence for a man at “the pinnacle of corporate America,” saying a message needed to be sent to corporate executives that they will go to jail if they give out nonpublic information. At the time of his arrest, Moffat was a senior vice president and group executive in charge of IBM’s Systems and Technology Group.

Michaelson said inside trading was “pervasive on Wall Street,” where it is carried out by people who control vast sums of money.

“Inside trading creates an impression that the market is rigged,” he said. “When the market is harmed, the economy is harmed and we are all harmed.”

Moffat’s defense lawyer, Kenneth Ian Schacter, told the judge his client should not go to jail because he had suffered enough.

He said his crime was “not motivated by greed or banality or in any way to cash in in any way.”

Schacter made several references to Moffat’s wife, saying the case against her husband “has been extremely difficult for her on many levels.”

At another point, the lawyer noted that Moffat’s wife had to endure a “personal betrayal that happened here and yet she’s here to stand beside him.”

Schacter said Moffat has been vilified, ostracized by former workmates and must live with the fact he had brought disgrace on the company he loved. He said he was filled with shame and embarrassment and his reputation was shattered.

Chiesi, 44, of Manhattan has pleaded not guilty to charges in the insider trading scheme. She faces a potential penalty of up to 155 years in prison. Chiesi worked for New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc. that had assets worth about $1 billion under management.

She has asked that her trial be severed from the trial of Galleon Group founder Raj Rajaratnam, 52. He too has denied securities fraud charges that were first brought in October.

Once described as one of wealthiest men in the United States, Rajaratnam remains free on $100 million bail. Charges against him carry a potential penalty of up to 185 years in prison.

In transcripts of telephone calls between Chiesi and Rajaratnam, they could be heard talking about Moffat as if they controlled him.

A government wiretap of a Sept. 26, 2008, phone conversation caught Chiesi and Rajaratnam discussing whether Moffat should move from IBM to a different technology company to aid the scheme, according to court papers.

“Put him in some company where we can trade well,” Rajaratnam was quoted in the court papers as saying.

The papers said Chiesi replied: “I know, I know. I’m thinking that too. Or just keep him at IBM, you know, because this guy is giving me more information. … I’d like to keep him at IBM right now because that’s a very powerful place for him. For us, too.”

According to the court papers, Rajaratnam replied: “Only if he becomes CEO.” And Chiesi was quoted as replying: “Well, not really. I mean, come on. … you know, we nailed it.”

(Copyright 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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