Tuesday, March 30, 2010

Ex-IBM exec Moffat pleads guilty to securities fraud

Lest anyone believe that tipping without trading is not a big deal, a lesson to be learned. Robert Moffat, a senior executive at IBM pleaded guilty yesterday to conspiracy to commit securities fraud and securities fraud, in connection with his involvement in what is being called the largest insider trading case involving a hedge fund fraud in history. (One press report called it the largest hedge fund fraud in history. Unfortunately, it is not even close).

Moffat was not accused of trading on inside information, but rather he was accused, and plead guilty to disclosing inside information to the hedge fund. The press reports indicate that although the charges carry a maximum 25 year sentence, Moffat is expected to receive 6 months in prison.

He is not accused of receiving any financial benefit from the disclosures, and his motives for doing so will remain a mystery. But, his life has been destroyed, and I suspect there will be a SEC civil suit for fines and penalties.

The arrests in connection with the case back in October made significant headlines, (see this Bloomberg article for example) not only because of the scope of the alleged insider trading, but because of the investigative tactics used by the government. The investigation is reportedly the first time that wiretaps have been used in an insider trading investigation. More>>>

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