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

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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