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Robert Moffat Jr.'s long, strange, 31-year IBM trip from rising young star to cost-cutting kingpin to possible successor to IBM CEO Sam Palmisano ended with an insider trading guilty plea in Manhattan federal court on Monday.
The 54-year-old Moffat, a Palmisano confidant who was tapped by IBM's CEO several times to handle troubled businesses, pleaded guilty Monday in Manhattan before U.S. Magistrate Judge Frank Maas to one count of conspiracy to commit securities fraud and one count of securities fraud.
The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of the greater of $250,000 or twice the gross gain or loss from the offense.
The securities fraud count carries a maximum sentence of 20 years in prison and a fine of $5 million. Moffat is scheduled to be sentenced on July 26 by U.S. District Judge Naomi R. Buchwald.
The government is also seeking "forfeiture from Moffat of the property that constitutes or is derived from proceeds traceable to the commission of the offenses charged."
Moffat was senior vice president and group executive for IBM's $20 billion hardware business until he was arrested last October in what federal authorities are calling the largest alleged hedge fund insider trading case ever.
The case, which marks the first time that court-authorized wiretaps have been used to target insider trading on Wall Street, allegedly netted $20 million in illegal profits, according to the Manhattan U.S. Attorney's office.
Preet Bharara, U.S. Attorney for the Southern District of New York, in a prepared statement, characterized Moffat as a senior executive at a Fortune 500 company who "willfully ignored his professional and legal responsibilities by secretly feeding inside information to his friend."
His "friend" was Danielle Chiesi, who at the time of the inside information "conspiracy," worked for New Castle Partners, an equity hedge fund group affiliated with JPMorgan Chase & Co.