Executives from Intel Capital and IBM face insider trading charges after allegedly scheming to provide information that others used to reap millions of dollars in illegal profits, the US Securities and Exchange Commission on Friday.
The SEC charged six individuals for conspiring to execute trade securities using confidential information from companies including Intel, Google and Advanced Micro Devices, the SEC said in a press release. Some of the non-public information shared between the individuals related to corporate earnings or takeover activity at companies, SEC said.
Executives charged included Robert Moffat, senior vice president and executive in IBM's systems and technology group, and Rajiv Goel, who is Intel treasury's managing director of investments. The SEC filed a complaint in the US District Court for the Southern District of New York.
Moffat and Goel allegedly provided insider information about companies including Sun Microsystems and Intel.
Other individuals charged include Raj Rajaratnam, a portfolio manager with hedge fund Galleon Group, who gained close to $25 million in illegal profits, according to the SEC. Rajaratnam is considered the 559th richest man in the world according to Forbes magazine. Others charged in the complaint include Anil Kumar, a director at McKinsey, and Danielle Chiesi and Mark Kurland of New Castle Funds.
"Raj Rajaratnam is not a master of the universe, but rather a master of the rolodex," said Robert Khuzami, director of the SEC's division of enforcement.
"He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity," Khuzami said.
Goel allegedly provided insider tips to Rajaratnam about certain Intel quarterly earnings and a pending joint venture concerning Clearwire, in which Intel has invested, the SEC said.
Based on the insider information, Rajaratnam executed trades on Galleon's behalf. The tips netted Goel close to $250,000 in illicit profits after Rajaratnam executed trades for Goel's personal brokerage account based on confidential tips concerning Hilton and PeopleSupport.
Goel has been placed on administrative leave until the company looks into this matter, said Intel spokesman Chuck Mulloy. Intel has not been contacted by authorities about the charges, but will fully cooperate if and when contacted.
The SEC said IBM's Moffat allegedly provided inside information about Sun Microsystems to New Castle Funds' Chiesi. The information was provided when IBM was considering acquiring Sun. Chiesi allegedly made trades on behalf of New Castle Funds based on the tips and netted about $1 million in profits.
IBM declined comment on the subject.
McKinsey's Kumar allegedly tipped off Rajaratnam about pending transactions involving Advanced Micro Devices and two Abu Dhabi-based "sovereign entities," the SEC said in a release. Rajaratnam then made trades on Galleon's behalf based on the insider information.
AMD has had multiple transactions involving the Abu Dhabi government in recent years. In 2007, the Abu Dhabi government's Mubadala Development Company paid $622 million to acquire an 8.1 percent stake in AMD. Earlier this year, AMD spun off manufacturing assets to a separate company called GlobalFoundries in a joint venture with Advanced Technology Investment Company, an investment firm owned by the Abu Dhabi government. Abu Dhabi is an emirate in the United Arab Emirates.
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