Case Study on Robert Moffat Insider Trading Scandal at IBM

Robert Moffat Insider Trading Scandal at IBM

Insider trading cases have deepened and increased on daily basis as more arrest and convictions have become the odd of the day. The recent case of Robert Moffat insider trading at IBM [International Business Machines] has brought a lot of changes in how people view the insider trading scandals and helped maintain law and ethics in business. Robert Moffat, senior executive of IBM was recorded by the FBI in the Galleon hedge fund insider trading probe, pleaded guilty to conspiracy and securities fraud charges.

Robert Moffat was arrested and charged along with principal defendants, Raj Rajaratnam, Galleon founder and Danielle Chiesi, former New Castle Funds LLC trader. The prosecutors described the case as one of the biggest hedge fund insider trading case ever in the United States. Robert admitted to the charges regarding confidential information he gave to Chiesi during the petition proceeding in the Manhattan federal court. He was the 11th defendant to plead guilty of the offence.

The prosecutors said that he had provided inside information on IBM’s licensing of a deal with Advanced Micro Proofreading-EditingDevices Inc. to Chiesi in 2008.  He was referred to earning information about the Lenovo Group Limited, while he was not a voting member in the company’s board and getting details of IBM server sales. He accepted his conduct for disclosing confidential information to Danielle Chiesi. He echoed his words by saying that he provided Ms. Chiesi confidential information and not public during his plea proceeding in the court.

A number of 21 traders, executives and lawyers were arrested or charged in regard to their association in the case and majority were Raja Rajaratnam friends and business acquaintances. More than 8 defendants have signed cooperation agreements with the federal prosecutors and may be called to testify in the insider trading criminal trial involving Robert Moffat, Raj Rajaratnam and Danielle Chiesi.

The prosecutor said that, in August 2008, Chiesi and Robert discussed a confidential business transaction that ADM was working on a deal with investors from Abu Dhabi.  They were aware that IBM would be granting a license to an individual to be spun off by Advanced Micro Device. At the end of the phone call, Chiesi asked about the timing of the deal involving AMD and Moffat came clear that it will between six to eight weeks after the meeting.

Insider trading cases have been rampant and people Raj Rajaratnam, who conspired with Robert Moffat, have earned millions from illegal trading. Companies like Google, Akamai and Hilton hotels are some of the few that have been defrauded by these insider traders. This is a vice that has affected the business sector for many years and picking out these executives and their associates is one of the best ways of reducing the impact of the actions in developing global economy. These insider trading cases will also act as a lesson to those who have been picked to run executive positions in these companies. Hence, confidential information will always remain a private entity regardless of ones position in an organization.

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