Insider trading: IIT graduate gets bad press
By Meenakshi

In July, 2009, Techgoss has exclusively reported on how the Infosys APAC BPO Head had been jailed for insider trading and how quickly he was removed from every Infy website and forum. Then, IBM did the same after the US Govt laid charges against one of its executives in the largest Hedge Fund fraud involving Indians.

It all started when Sri Lankan American billionaire Raj Rajaratnam, who founded the $3.5 billion Galleon Hedge Fund, was arrested in October, 2009, for insider trading.  Also, arrested were Indian born executives from Intel and McKinsey, along with others.  IBM boss Robert W. Moffat, was also alleged to be involved in this scandal.  53 year old Robert Moffat was a senior Vice President and in the running to succeed IBM CEO Samuel Palmisano. Robert resigned from IBM and was soon scrubbed from its official sites.

Raj Rajaratnam is currently out on $100 million bail. His company Galleon had invested hundreds of millions of dollars in tech companies like Google, Apple, eBay, Cisco, Dell and EMC. The American Government feels that illegal insider information helped his investments in some tech companies.  

This week, Wall Street Journal reported on how IIT Graduate and Harvard MBA, Rajat Gupta, was being investigated for allegedly leaking confidential information to Raj Rajaratnam.  Rajat was a Director of Goldman Sachs when he allegedly told Raj about a $5 Billion investment into the Wall Street giant.  This week Rajat Gupta quit Goldman Sachs in the face of such charges.

What is not public knowledge is that one of Rajat Gupta’s IIT trained colleague in his India-oriented private equity firm New Silk Route had his own brush with allegations of insider trading.  Pehub is reporting:

“
Rajat Gupta currently helps run an India-focused private equity firm called New Silk Route. Moreover, he’s not the only New Silk Route pro who knows his way around an insider trading investigation.

The other would be Victor Menezes, listed as a senior advisor to New Silk Route. That sounds fairly part-time, but Menezes appears on the firm’s website as one of three faces on its “leadership” page. Gupta and Parag Saxena — co-founder of Vedanta Capital and former head of Invesco Private Capital — also are listed.

Back in 2006, the SEC alleged that Menezes, then a Citigroup senior vice chairman, sold nearly $30 million of Citigroup stock just before the company announced a large quarterly loss related to the Argentinian debt crisis. The sale allegedly helped Menezes avoid around $1.5 million in losses. He later settled with the SEC for $2.7 million, without admitting or denying any wrongdoing.
“

Victor Menezes studied at IIT Mumbai before doing his higher studies at MIT.  Both Rajat and Victor are on the Board of IITs.

(Techgoss had published the following article on Oct 19, 2009)

First Infosys, now IBM scrubs tainted manager
By Meenakshi Iyer

In July, 2009, Techgoss has exclusively reported on how the Infosys APAC BPO Head had been jailed for insider trading and how quickly he was removed from every Infosys website and forum. Now, IBM has done the same after the US Govt laid charges against one of its senior most executives in the largest Hedge Fund fraud involving Indians.

It all started when Sri Lankan American billionaire Raj Rajaratnam, who founded the $3.5 billion Galleon Hedge Fund, was arrested last week for insider trading.  Also, arrested were Indian born executives from Intel and McKinsey, along with others.  IBM boss Robert W. Moffat, was also alleged to be involved in this scandal.  53 year old Robert Moffat was a senior Vice President and in the running to succeed IBM CEO Samuel Palmisano.

Raj is currently out on $100 million bail. His company Galleon had invested hundreds of millions of dollars in tech companies like Google, Apple, eBay, Cisco, Dell and EMC. The American Government feels that illegal insider information helped his investments in some tech companies.  

Till recently, IBM described Mr. Moffat on their website as “Robert W. Moffat, Jr. is senior vice president and group executive, IBM Systems and Technology Group. Named to this position in July 2008, Mr. Moffat is responsible for all IBM hardware offerings as well as the microelectronics division, which translates IBM research and development into semiconductor solutions for IBM systems and OEM clients. In addition, the company’s integrated supply chain operations, which include global manufacturing, procurement and customer fulfillment, report to him. Mr. Moffat is a member of the IBM Performance Team and the IBM Corporate Operations Team. He serves as a member of the Board of Trustees for The Manufacturing Institute, an educational and research affiliate of the National Association of Manufacturers. He is also a non-voting observer on the Board of Directors of Lenovo Group Limited.”

Even before the courts have passed judgment on Mr. Moffat, he is being scrubbed out of all official IBM websites and forums. 

Slashdot is reporting

“
Among those charged in the largest hedge-fund insider trading case in US history was IBM Sr. VP Robert W. Moffat, the heir apparent to IBM CEO Sam Palmisano and the guy behind Big Blue's 'workforce rebalancing' and the sale of IBM's PC unit to Lenovo. IBM's not talking about the incident, but it's interesting that Moffat's bio is MIA at IBM.com ('Biography you tried to access does not exist.'), and his Smarter Planet video can no longer be found ('This video has been removed by the user.') at IBM's YouTube Channel. Do you need approval from the Feds before tidying up after someone who's under investigation? BTW, if stories and comments appearing in the Times Herald-Record and Poughkeepsie Journal are any indication, Moffat may want to avoid a local jury trial. 'I have talked to a few IBMers today, and there seems to be a lot of cheering in the halls of IBM over his arrest,' said Lee Conrad of Alliance@IBM.
“

It should be noted that Robert Moffat did not make any money out of this scandal, but he is being charged with disclosing sensitive secrets to a female ‘friend’ who profited from the inside info.

(Techgoss had published the following article on July 28, 2009)

Infosys APAC BPO Head jailed for insider trading
By Meenakshi Iyer

Infosys has been trying to keep the story under wraps but the ostrich can't keep its head in the sand permanently. Allen Lam, blue eyed boy and Head of Infosys Asia Pacific BPO business has pleaded guilty for insider trading during his stint with CLSA in 2005. Lam tipped Ryan Fong, a friend and ex-hedge fund manager at HSZ Ltd with inside information

Lam told Ryan of plans by JCDecaux Pearl & Dean, an outdoor advertising company, to buy a 73.38 % stage in Hong Kong listed Media Partners International Holdings. Lam was privy to this information being a senior banker in CLSA. Predictably, both made a small fortune by investing personal funds and capitalizing when the share price rose. Lam made the investment via his wife's account.

Allen Lam and Ryan Fong have been taken into custody. Read Michael Blanchflower's (legal counsel to Lam) hilarious plea to the judge, "Please don't send him to prison. Mr. Lam made no direct personal gain. The profit made by his wife was "a very, very small amount". Allen was jailed for 6 months and fined $8,900

Allen Lam did high profile stints with Bank of America and CLSA before joining Infosys. Allen was VP and Head of Infosys Asia Pacific BPO at the time of his arrest and was looking after Bangkok, China and Philippines.

I wonder what CEO and MD, Infosys BPO, Mr. Chaudhary has to say on this conviction. Incidentally, Lam is a colleague of Mr. Chaudhary since their Credit Lyonnais Securities/Bank of America days, and reportedly the blue-eyed boy had a lot of growth promise within Infosys. The Satyam saga started with a small misappropriation and soon Mr. Raju was riding the tiger.

Over to Infosys and risk management.