IBM's Robert Moffat -- Colleagues and Experts Doubt His Involvement in Insider Trading Scandal

October 19, 2009 12:37 PM | Categories: Jason Busch

Earlier this morning, I had the chance to quickly speak to one of Robert Moffat's former executive colleagues from IBM in an on-the-record conversation. I've spoken to others off-the-record as well. For those who are just catching up with the insider trading scandal that's rocked Wall Street, McKinsey and IBM, among other firms, Bob Moffat, a long-time IBM executive, has been named as one of the conspirators. According to a Wall Street Journal article from earlier today, "Mr. Moffat was charged with conspiracy to commit securities fraud". But the FBI affidavit and the actual SEC complaint "doesn't accuse him of making money from his tips".

Even though Moffat's name and bio appear to have been taken down from the IBM website as of Monday morning, his most recent title and role was that of "Senior Vice President, Integrated Operations," according to a cached site I was able to find. He was "appointed to this position in February, 2002" and "leads IBM's end-to-end supply chain operations, including procurement, systems manufacturing, logistics and customer fulfillment processes for IBM worldwide". I spoke to an IBM spokesman early this afternoon who told me that Moffat has been put on temporary leave and is not currently an officer of the company.

According to another Journal article also covering the news, "the complaint also alleges [that a cooperating witness and someone else named in the probe] had asked Mr. Moffat what IBM's first quarter looked like". And from the response and trading pattern, it appears that someone provided this information to the funds trading on the information (whether this was Moffat or not will certainly form the crux of the analysis in this case). But who is Moffat and what do his former colleagues think of him?

John Sharman, who is currently Executive Vice President at Maine Pointe LLC, a consultancy, and a retired executive from IBM who spent twenty-five years with Big Blue and worked with Moffat, described him as the "consummate professional" earlier this morning. John told me that he "would be very surprised if he was involved in anything illegal" and that he's "not sure what [his] motivation would be". Moffat was "very well respected around the world and had risen up through ranks". Others I have spoken to have also said similar things about Moffat, expressing shock that he would be implicated in the unfolding insider trading scandal.

In my view, two things are not adding up here. First, given the unanimous support that Moffat enjoys among those I've spoken to, it's clear that none of his past behavior would be indicative of this type of information disclosure. In fact, what Moffat is accused of goes completely against the top-down, lips-sealed structure of IBM, which he was not only a part of, but a champion for.

Second, there does not appear to be any financial motivation for sharing this information. Ask yourself -- who benefited from Moffat's disclosure? Not Moffat, at least as the affidavit suggests thus far. Why would someone who was clearly being groomed for a CEO slot at an organization jeopardize everything for nothing? I don't get it, nor do his former colleagues.

Regardless, I would encourage all companies currently working -- or considering working -- with IBM's procurement consulting and outsourcing organizations to look past this news. In contrast with McKinsey, where it appears that confidential client information may have been compromised, there is no accusation of such behavior in the case with IBM.

- Jason Busch

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bullshit! Moffat is involved and there may well be others at IBM including his mentor Sam Palmisano. They all travel in the same business circles.

# Posted By Cynthia Brown | 10/19/09 1:13 PM

Bob Moffat will get his day in court, and the FBI will have to prove its case one way or another.

Despite the legal process, there is another issue, and that is did he violate the IBM Business Conduct Guidelines. (All IBMers have to sign an annual certification.) In the guidelines, if he did speak to a hedge fund manager about such things as future IBM earnings statements, confidential information gleaned in the course of his duties regarding Sun and AMD, and passed this information on, directly or indirectly ... is a clear violation of how IBM conducts business. I suspect the burden of proof is also a lot lower. If any of the allegations are true, he is in violation. At present, I suspect his
credability to function as a IBM Sr Vice President is shot.

When the tapes come out, we will definitively know what he said to the hedge fund people, and it will be definitive if he is in violation of the IBM guidelines, the legal process not withstanding.

# Posted By Anonymous | 10/19/09 2:15 PM

This article is clearly low on facts and high on praise for someone Jason doesn't even know. Generally someone is not arrested by the Federal Government if their hands are clean. Clearly giving out confidential information that can be used for trading is a federal crime and the complaint that Jason didn't apparently read spells that out.

# Posted By Jim | 10/19/09 2:18 PM

Jim,

Correct, I don't know Moffat. But I do know the IBM organization, including folks past and present (in fact, I consulted to the PWC group that became IBM consulting many years ago).

There's a lot of people out there who if they were accused of this, I'd have no problem finding at least one source who would support the accusations mapping to their historic underlying character. Not this time around, at least in my limited research. Everyone is saying the same thing about Moffat.

Having said this, could he be guilty? Absolutely. But as I said, with what I'm hearing vs. what has happened and I've observed, some things just aren't adding up.

# Posted By Jason Busch | 10/19/09 2:37 PM

Bob Moffat was Senior VP of Systems and Technology Group, which meant that he was responsible for the design, development and operations of all hardware - chips, computers, etc. He had approximately one-third or more of the corporation's 350,000 employees reporting to him.

There indeed are two issues here. One is whether he broke the law, and that will be determined in the court of law. The second is that, as an employee and officer of IBM, his role is (was?) one where he had access to confidential information. In addition to the IBM business conduct guidelines, to which all IBMers must certify annually, Bob also signed nondisclosure agreements so that he could review quarterly results before the financial filings. The consequences of violating the IBM confidentiality is termination, and he never failed to remind anyone and everyone of that during every quarterly review.

One thing that is not clear here is his motivation for sharing information (if he did) with Ms Chiese. I suspect we will know more once the details of their "friendship" are exposed.

I pity his wife and children, regardless.

# Posted By Former Bob Moffat employee | 10/19/09 2:38 PM

The legal process will determine his guilt or otherwise, but you will sense from the postings here that IBM has a clear code of conduct that is hammered home internally, and which IBM'ers live by. It is simply not good enough for a senior executive to think he is above this. I have spoken to many of my former IBM colleagues about this, and they are most concerned with his dragging the god name of IBM through the mud, the breach of the Business Conduct Guidelines, and his guilt, pretty much in that order. He was widely respected - or maybe that's feared, but not widely liked. There will be no way back, even if found completey innocent in court, because - having read the 27 pages of the complaint - he breached the Conduct Guidelines, and that is a sackable offense.

# Posted By A.N.Other | 10/19/09 10:25 PM

I read the full text of the complaint and as far as I can tell the actions Moffat are charged with seem perfectly in line with the IBM corporate culture. Moffat has an earned reputation as an *&Q. As far as getting paid for the info. Maybe the plan was to compensate him at some later date? It's seems pretty simplistic to jump to an assumption of innocence based on no money trail to him to date. Who knows what the agreements were as far as compensating Moffat at some future time?

# Posted By fomeribmer | 10/20/09 1:12 PM

I am pissed about the choices Mr Moffat has made. As a current IBM employee, we have a culture of business conduct guidelines that every employee knows if you breach them, youre fired. Not sure what Mr Moffat was thinking, but it will all come out when he had his day in court. Thanks for the black eye *AS@$*.

# Posted By Current IBM employee | 10/20/09 4:06 PM

Circa 2003, Bob Moffat held a town hall meeting at one of IBM's manufacturing plants in Rochester, Minnesota. During that meeting, he talked about a poor customer service he had received - a personal matter. He mentioned how he had introduced himself as an IBM executive, and even sent an email as such in expressing his displeasure of the service. Here's why this is interesting. As a relatively new employee at the time, it struck me as not only odd that he openly expressed how he had used his position as an IBM executive to complain about a personal service he received, but he was saying this to thousands of people who are trained, and asked to sign an annual Business Conduct Guideline that they would not do such. At that point, I sensed that this guy was bad news... he didn't seem to represent our values. But hey, what do I know? I was only a pinion at the big IBM machine.

# Posted By Former IBMer | 10/21/09 1:36 AM

Jason;

I recommend to read the comments to the various articles on Moffat at the poughkeepsie journal website. A lot of IBMers talking there; most of them with a very low opinion on Mr. Moffat.

So it really depends whom you are talking to. You were talking to other high ranking folks ... you know, over here in Germany we have a proverb:

one crow will not peck out another crow's eye ...

I guess you will get the meaning.

# Posted By Also an IBMer | 10/22/09 5:15 AM

I'd like to comment as a line executive of a firm that is a somewhat significant IBM customer. This scandal has totally eliminated our confidence in the ability of IBM to keep any secrets about my company confidential. The day of the scandal I was brought into a BoD meetings and told in no uncertain terms that IBM employees were to be restricted as to access to our facilities and Intellectual Property. As of today, IBM is no longer be a trusted partner, but relegated to the role of just another IT vendor. We will no longer invite IBM representatives and executives into our strategy meetings or even given access to any business planning documents.

Unfortunately, colleagues and so-called industry experts don't cut it when it comes to the trust of a client that pays about 1 million dollars a month to IBM.

Mr. Moffat may very well be proven totally innocent and he may be a wonderful person and IBM might sell the best solution, but trust and confidence have no price.

# Posted By Joe Rocket | 10/22/09 7:47 AM

Moffat & IBM CEO Palmisano made large stock trades on August 21, 2008. Palmisano cleaned out the till on August 28, 2008. Palmisano's handcuffs may be waiting !

For data sources, visit --

ibmTheWidowMaker com

# Posted By Madame P J Bailey | 10/22/09 6:13 PM

Light on facts, long on supposition. Moffat is a snake who will do whatever he needs to do to enrich himself on the backs of others. Not only am I sure he did this, but I'll bet a lot of the other executives on Sam Palmisano's inner circle are guilty of this or worse.

# Posted By IBM Insider | 10/30/09 10:28 PM

There's been no news regarding the status of Bob Moffat insider trading case, Sam Palmisano's adopted son. Conspiracy related to Obama having his nose up Palmisan's ass or vice versa???? However, there's a little news regarding Palmisano making slightly less income last year. Even less news regarding IBM's lay-off of over 2,500 U.S. & Canada employees a week ago. The arse still makes over $20 million. Where's the news?

# Posted By Remembering Bob? | 3/14/10 1:09 PM

If Bob Moffat is innocent... I knew there was massive frauds in IBM CZECH REPUBLIC (BRNO) and did nothing... in addition he let the frauding management get promotions and pushed away fraud reporters...

# Posted By Abecassis | 3/24/10 5:02 AM

sorry I forgot the link to report
http://crazystory.baywords.com/about/

# Posted By Abecassis | 3/24/10 5:03 AM

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