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Local Tech Wire
RESEARCH TRIANGLE PARK, N.C. – A filed by the Securities and Exchange Commission against an alleged hedge fund insider trading ring accuses longtime of providing “nonpublic information” about Sun and his own company.
Moffat, 53, allegedly conveyed the information Danielle Chiesi, 43, whom the SEC document describes as a “friend.” Chiesi is among the six people charged in the case. She worked at New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc.
Moffat, who has been an advisor to Lenovo and was part of the management team that engineered the sale of IBM’s PC business to Lenovo in 2005, has been reported to be a confidant and likely successor to IBM Chairman and CEO Sam Palmisano.
Also charged in the case was billionaire Raj Rajaratnam, a partner in Galleon Management and a portfolio manager for Galleon Group, a hedge fund with some $7 billion in assets under management.
The other three facing charges” Rajiv Goel of Intel Capital, Anil Kumar of McKinsey & Co., and Mark Kurland, a colleague of Chiesi at New Castle.
Paragraphs 84 to 90 of the SEC complaint focuses on Moffat and Chiesi. It reads as follows:
Insider Trading in SUN
84. Moffat, IBM’s Senior Vice President and Group Executive, Systems and Technology Group, conveyed to Chiesi material nonpublic information about SUN’s Q2 2009 results in advance of SUN’s January 27,2009 earnings release.
85. In January 2009, IBM was conducting due diligence on SUN in contemplation of a possible acquisition by IBM of SUN. Pursuant to a confidentiality agreement between IBM and SUN entered into as part of that process, SUN provided IBM with its Q2 2009 earnings results in advance of the January 27, 2009 announcement. Moffat was involved in IBM’s due diligence of SUN, and as a result had access to SUN’s .earnings results.
86. Chiesi and Moffat, who are friends, contacted each other repeatedly during January 2009, with the frequency of contact between the two increasing significantly just prior to the SUN earnings release.
87. Moffat was one of a group of IBM executives on the preliminary due diligence team arriving at a designated location to conduct due diligence on SUN on January 19, 2009. Moffat contacted Chiesi at home that evening, and had several conversations with her over the next several days. In the course of one or more of these conversations, Moffat provided Chiesi with material nonpublic information concerning SUN’s Q2 2009 earnings.
88. On Monday, January 26, New Castle began acquiring a substantial long position in SUN. On January 27,2009, after the market close, SUN reported its Q2 2009 25 earnings information. SUN’s performance substantially exceeded consensus estimates, including higher revenue and margins, posting a $0.02 per share profit whereas consensus estimates called for a loss of $0.09/0.1 0 per share. SUN’s shares rallied on the news, rising 21 %, from a January 27 close of$3.99 per share to a January 28 close of $4.86 per share, generating profits of nearly $1 million for New Castle.
89. On January 28,2009, Moffat transmitted to SUN, on behalf of IBM, a preliminary proposal to acquire SUN.
90. Moffat also tipped Chiesi to material nonpublic information about IBM’s quarters ending December 2008 and March 2009 that he obtained by virtue of his position at IBM, and Chiesi traded on the information she received from Moffat on behalf of New Castle. Finally, Moffat tipped Chiesi to material nonpublic information about the AMD Transactions described immediately below that Moffat obtained by virtue of IBM’s participation in the deal, and Chiesi traded on the information she received from Moffat on behalf of New Castle.