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back to article Feds’ insider trading wiretap snares IBM heir apparent

The heir apparent to IBM CEO Sam Palmisano has been arrested and charged with insider trading, as US authorities cracked down on an alleged $20m scheme involving shares in some of the IT industry’s biggest names. The case — which the FBI calls the largest hedge-fund insider trading case in US history — has also seen the arrest …

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Unhappy

So unnecessary.

The saddest bit is this all seem to have been very wealthy people, why on earth did they throw it all away for a few extra million? Their greed just beggars belief.

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Stop

NOT heir apparent never was

Ginni Rometty has been and will be the next CEO. She has had the same career path as SAM.

Ginni will become the most powerful Woman in the corporate world.

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Pirate

@matt

Presumably for the same reason they are screwing the employees over left, right and centre - to make more money.

icon? Corporate piracy, hollowing out institutions from within.

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IT Angle

Boys in da hood

Sounds like a bunch of freshmen with too much money and very little social obligation.

All too familiar a pattern amongst the wealthy.

I bet they even download pirated music.

Wonder if they will go to jail ?

ALF

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Anonymous Coward

Wall Street

They will never learn will they these banker types.The City in London is also due for a massive clean up. Lock them up and throw away the keys.

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Nothing new here...

Ursus defecate in arboreal surroundings, man in purple coat heads up ancient religious sect....

Move along, nothing to see.

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Silver badge

@Matt Bryant

Unfortunately it is only greedy people that amass such wealth. If they were not so greedy they would not be so rich in the first place.

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Flame

Re: So unnecessary

Exactly. The trades in question are drop in the ocean compared to a day of quant and overall Galleon's and Co sucking of imaginary money out of the market.

It is quite sad, when even insider knowledge at CEO level in the biggest names in the business nets less than a good day of algorithmic low latency voodoo shoveling unreal money from one pocket to the other.

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@ Matt Bryant

And how do you think they became so wealthy?

Another reminder of why the stockmarket is a rigged game.

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Go

@ Matt Bryant

Unnecessary? A few extra million?

This is their primary business. This is how they make their money.

I hope this is only the beginning of these cheaters' demise.

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Flame

Greed..

Those whom are found guilty, should and need to be given the maximum penalty for their crime.

One only needs to look at the current state of the world economy and wonder about how got here in the first place. The rich getting richer on the backs of the less fortunate is a very old story indeed. In the current economy, with so many suffering financial loss, greedy people like that should be sent home via UPS ground. In tiny little boxes.

" }:>"

^v^v^v^v^v^v^

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Happy

Comical

Cops and robbers, Cowboys and indians, but no Japs and commando's?

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Paris Hilton

Well well !

I know it is asking a bit much to ask people to forgo self interest and take a "moral" approach (how old fashioned is that word), but you can not be surprise if there is cynicism from the people when there is so much cynical self interest from their leaders.

Paris - at least being screwed is a pleasure

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FAIL

Shame he didn't listen to TJ Watson snr.

"We call that strategy 'Think,'" said Bob Moffat, senior vice president of IBM's Personal Systems Group.

Quoted by CNET on November 4, 2002, before he got elevated to Senior VP.

Just think. When you have telephone conversations about illegal actions, for example.

The new generation of people reporting to Sam is way less smart and technically rooted than the generation that Gerstner put in place. Mr Moffat has been referred to in the blogosphere as an "idiot exec" and "self absorbed turkey" well before this unfortunate event. Not having dealt with him personally, I can't say whether those comments are justified. But you do have to be pretty self-absorbed not to think that somebody might be listening.

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Anonymous Coward

@ So unnecessary

"The saddest bit is this all seem to have been very wealthy people, why on earth did they throw it all away for a few extra million?"

Well, you could start thinking about how they got so rich in the first place. There are couple of predictable theories in that direction..

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FAIL

A woman running IBM?

C'mon get real. It will never happen.

Most of the women in senior exec positions got there because of their sex.

If they were men, they would not have gotten that far up the ladder.

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@Matt Bryant

Greed isn't normally associated with pity, in either direction, why does it seem sad?

A more appropiate word would have "disgusting".

Why they threw it away for a few extra million is already covered by your use of the word greed.

Their greed isn't what beggars belief, as you noted they were already wealthy individuals,you don't get that way without being greedy, what actually does beggar belief is the stupidity of the individuals involved.

Lets just say, these people are living walking proof, that an education is no substitute for intelligence.

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FAIL

Two Words

Martha Stewart

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So unnecessary .. and so logical

Any coincidence, that exactly those folks make it to the highest ranks in big corporations?

The term "enough" doesn't exist in their mindset, their thinking is dominated by "MORE!".

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Stop

£20 million... mere chickenfeed

compared to what the real criminals are still getting away with... someone deliberately wrecked the world's economy and walked away with billions... that spike in oil prices was deliberately engineered to squeeze people so they stopped spending and so trigger redundancies...

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Go

Big surprise!

Yeah right. These idiots are poster children for everything that's wrong with Wall Street. When the only measure is money, it doesn't matter how much you have or how you get it, only that you get more. Hats off to the NY AG, the FBI, SEC and anyone else who helped to nail these greedy bastards. They need to do MORE of this!

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Anonymous Coward

Avarice, Plain and Simple

Bravo, Register reporters and editors, for presenting the facts and the actual court documents. I would suggest a follow-up "inquiry" into why certain USA-based press conglomerates are virtually ignoring this story (e.g. CNN) while they replay trash re: "Balloon Boy".

This speaks volumes about the inequality of compensation systems in the USA. Capitalism? Yes, fine. But when executive compensation isn't sufficient, and they choose to break the law, throw them in JAIL.

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your lack of cynicism is suprising guys...

You seem to be assuming its first offence and not asking how they got so wealthy... Just another example of how the disproportionate profits earned by the largely pointless exercise of shuffling shares around corrupts society.

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Anonymous Coward

@Matt

Because even if you win the rat race, you're still a rat.

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Anonymous Coward

More info on top 400 income earners

http://mjperry.blogspot.com/2009/01/significant-turnover-in-top-400-us.html

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Stop

RE: AC 16:51

Could it be they are wanting to "dump" their own shares in these entities on an unsuspecting public.

I have been a reader of this site for years, this is my 1st comment, I have seen so many "conspiracy" theories it is not funny, looking at the way things are going raises serious questions.

Who is in control anyway?

maybe amanfrommars could enlighten me...

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FAIL

What bothers me about

people like this is -

they make enough in one month for me to retire for the rest of my life. Here we are talking about taking the $ and putting it in the bank and drawing the interest. Even at the miserable level it is at right now, I could replace my - and my wife's - salary. On top of this, we are among the high end wage earners in the US. (OK the low end of the high end - but nothing to sneeze at.)

At some point I had heard that the top 400 wage earners took in 1% of all income in the US - in 1980. I believe that the top 400 wage earners now is close to 2% of all income in the US. While looking for something to confirm this I found that in 2000, those top 400 AVERAGED 174 Million dollars a year! ~70 BILLION dollars in income for just 400 people. (They paid on average 18% in taxes - and this was before the Bush tax cuts!) If the average income were $40k (it is not) than the total income in the US would be about 6800 Billion. The average is closer to 20K or 30K. Something is really Fvcked here.

The real problem is that they (the CEO scammers) are treated better than bank robbers and drug dealers while they do far more harm to society.

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FAIL

Slap on the wrist

It would be nice to see penalties for white collar crime to be appropriate to the damage that they cause. A life is worth about $500K, (Some international agreement on automatic compensation for airline victims). Thus by international standards these guys have destroyed about 50 lives. They need to be punished as such.

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Thumb Up

Much more than charges

Most of you seem to miss the obvious major fact - toward the end of the article. These guys are the ones that are placing CEO's in companies and shuffling them around to put them in positions where they can not only continue to feed back insider info, but manipulate the corporations to optimize their theft in future. I don't believe that these are the only manipulators doing the same. How else can the gang from Harvard put their cronies in charge of J.P. Morgan (Paulson or his successor) and later, the U.S. Treasury, who have no technical backgound whatsoever (B.A. degrees and degrees in law) to even begin to comprehend the business that they are overseeing?

And, Wall Street hasn't done this alone. They've done it with the complicity of legislators from both political parties. I hope this investigation yields a long list of names that can, in turn, be linked to the political contributions they've made over the past decades.

It might be bloody and the world markets might be shaken again, but at least it will be shaken for the right reasons (instead of lame excuses like being too big to fail) and we might then have an outside chance of rebuilding on a sustainable basis.

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Bronze badge
Welcome

Big is always good--just like cancer

I think the root of the unbridled greed is the 'bigger is always better' mentality. Or maybe it's the other way around, but it comes out the same in the wash.

I suppose the part that bothers me is that they deliberately look for the least cancerous parts of their own companies--so that they can sell them off. What's left is rarely healthy, though the next quarter or two may seem rosy.

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Bronze badge

IB cliche's

This story as perceived in the investor world would certainly be slightly different from the way we are seeing it here.

Investors think of Insider trading as a "privilege" and "information is an opportunity not to be missed". They also believe in "no risk, no gain". It's a mindset. Soon this case will be forgotten and rich investors will be back to insider trading.

Most of the young investor bankers have "no opinion" on insider trading - in general they don't really look at it as something "evil". Their perspective being "life's unfair, sometimes in your favor". In investor's world there is no serious stigma attached to being an inside trader. In wall street, money is worshiped. Any act that brings in money can't be evil then, yes ? Rich bankers are religious leaders of the investor world - openly pointing fingers at their past is considered sacrilegious.

An equivalent from IT world: Hacking. Especially in 80s/90s. It was/is considered "a skill" to be admired and not a lack of scruples to be despised. (Difference was they were not doing it for money - but for kicks. My intention in this writeup to illustrate how some specialized criminal acts are despised outside but not inside the community). Similarly in the investment world, "insider trading" is "good going, as long as you are not caught".

Solution:

- All b-schools/banks must do regular case studies on how insider traders have been caught. Make it interesting by showing how they were caught, not by joking about it.

- Do not create ultra boring courses titled "ethics in investment". Awareness is a bigger detractor than preaching.

- Start advanced/specialized courses in catching financial criminals.

- All exchanges should create an over-active economic offenses wing. (which is a lazy, political, bastard child of bureaucracy currently - in most of the world. Which govt wants it's "wall streeters" who bring in economic wealth to go to jail"? ).

- Educate finance ministers across the world on the benefits of keeping their economy engines clean. If this recession is not an opportunity to do so, another will never come.

- Code of conduct: disclose all hob-nobbing of investors and CEOs.

- PR agency to create awareness in minds of young, reckless investors on what happened to the fate some some celebrated Invetment Bankers, How easily they can get caught etc.

But hey, why am I writing this on an IT e-zine ?

-al.

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Boffin

TJ Watson snr.

@anonymous coward

You do know he was a total bastard too ? Take a read of "IBM and the Holocaust" http://www.ibmandtheholocaust.com/ before you start singing Watson's praises. They didn't run the Third Reich with pencils and paper.

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@£20 million... mere chickenfeed

Yes, its a small sum compaired to the 1.7 billion he has, but that 1.7 bilion is made up of 20 million transactions.......

When the police are up against people with that sort of cash behind them, it is both suprising that its got as far as it has and interesting to see if any convictions occur.

If they get jail time then there may even be a kernal of justice hidden in the legal system.

But don't forget we are only talking about a few people here, not the thousands who daily rig the financial systems to benefit themselves (and don't talk about it on the phone like that)

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Silver badge

Imaginative Travel for Stimulating Virtual TelePortation

"It is quite sad, when even insider knowledge at CEO level in the biggest names in the business nets less than a good day of algorithmic low latency voodoo shoveling unreal money from one pocket to the other." ... By Anonymous Coward Posted Saturday 17th October 2009 13:28 GMT

Now that's an Engaging Entanglement Game 42 Play Beta than just Good in Order to Better the Best in All that is Rested in Whatever is Left.

"algorithmic low latency voodoo" = high powered mojo juju in Ascendant Elevated Systems ....... Cloistered Circular Clusters ...... Singularities of Multiple Core Sourcing.

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Unhappy

Corporate crooks...

So we have:

(1) Relentless greed (even when they have millions they still want millions more).

(2) Arrogant contempt for the law (and so arrogant contempt for the views of others).

(3) They evidently spent years seeking powerful jobs to rule over others.

(4) Lying and cheating, with two faced cunning and duplicity.

Plus my favorite bit is this: "Chiesi allegedly said to Rajaratnam after obtaining information from Moffat. “If it leaks, I think I’m out of business… Because… who knows IBM? And who, who’s in bed with AMD? Put Danielle’s name on the fuckin’ ticket.”" ... So profit from it, but also set others up to take most of the fall if it goes wrong.

These are some good examples of the kinds of bosses to avoid. Frankly they show themselves to be lying cheating greed arrogant two faced scum bags. In other words all typical examples of people with a Narcissistic Personality Disorder (NPD).

Its shocking how many big name technology companies are in this case. It really shows big business is good at attracting NPD people to it (like flies). Only last night, I was watching a documentary about the Miami drug barons in the 1970s and 1980s and how they invested billions into big business as a way to launder money. It seems big business is riddled with these kinds of crooked detestable Narcissistic people so often at the tops of the companies. They all behave like the law doesn't apply to them, only to us. So we are effectively playing using a different rule book. No wonder they become so rich (at our expense). It seems the top crooks these days don't have to rob banks and companies, they just have to become the CEOs of banks and other big corporations. But then thats no different from the rich land owners of centuries ago bullying, taxing and robbing everyone else for living on their land. The concept of them owning the land has just been replaced with them owning the company we depend on to survive.

The more I see of the inner workings of big business, the more it reminds me of some kind of modern day version of a Feudal system and we are all trapped in that Feudal system. That is because while we all live in supposedly democratic countries, the vast majority of us are forced to work for these two faced greedy crooked arrogant tyrant leaders. Its very much like the old saying, “A man is no less a slave because he is allowed to choose a new master once in a term of years.” Just because we can choose to work for a different two faced tyrant, we are still just as much a slave. Plus money is power over people who need money to survive. So its no wonder NPD people seek these high up positions of power for their own gain, but how do we ever get to a world which is free from these greedy arrogant ruthless people, when they collectively control our countries and our lives. Plus as fast as we punish some of them, more will take their places.

Big business does seem to be some kind of modern day version of a Feudal system, where the monarchy is replaced by the current ruling party in power, yet so often they are behind the scenes (and behind our backs), on the side of the feudal tyrants who have power over so many of us. It feels like they are all in it, to get rich out of it, at our expense. So we all suffer so they can get ever richer.

Great now I've started the week feeling even more dismayed and demoralized. The rich and powerful are not people to look up to. The more I see the more I despise them for their greedy ruthless contempt for us.

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Anonymous Coward

But why?

Given that some sources are saying that Bob didn't profit from the insider trading, it makes me wonder about his motives....

With the constant slide in server sales heading up STG must have been a thankless job, and given the general consensus that he wasn't going to succeed SJP, maybe he, like the rest of us plebs, got sick of all the bullshit. Maybe he got so sick of it he didn't care anymore if he leaked the inside information. Maybe execs can get disillusioned just like the rest of us...

Or maybe he's just another arrogant exec that thinks the rules don't apply to them.

Whatever the reason, I'd like to know.

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Flame

oh come on

Please don't start making excuses for Moffat, he was a relentless cost cutter who made significant made significant money is shares, options and salary by making other peoples lives a misery. There is no doubt he was talking to this "broad" because he expected to a). make money from it b). position himself in that crowd as a knowlegeable/credible mover and shaker c). get in her pants

He did know better and even if he didn't make money directly, he was going to make money indirectly through the boost to IBM share price from his leaks.

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Anonymous Coward

MinionZero has it right

I too have been seeing the drift toward a new feudalism in this and many other developments of late.

When the new lords of multi-national conglomerate business seek to undermine the power of the sovereign - in the U.S. case, the sovereign power of the people by buying the leadership of both political parties with campaign contributions, and acquiring all the major channels of communications too, then it is they who control the lawmakers as well as the messengers and messages that are available to the vast majority of the voting public. Elections become rubber-stamp events to certify either of the two alternatives approved by them and not the people of the state. Gerrymandering by the parties throughout the U.S. insures the two-parties lock on power and control of all avenues to that power. Bluntly, after a millennium of struggle (you Brits studied Henry II's opening moves more than we did) to achieve sufficient power of the state to run the affairs of state, the many lords have re-seized the power of the state and, by so doing, have nullified the entire elaborate machinery of republican democracy, making democracy a sham and threatening republican government yet again.

Principal of the messages being delivered through their channels in the U.S. and abroad is an ideology, identified with the Chicago School of Economics and the late Milton Freedman, which, with a series of so-inspired changes to the regulatory laws over the past quarter century, freed the lords of all regulation by the sovereign government regarding mergers, acquisitions etc and, effectively, any regulation by competition - that they subsequently systematically stomped out in the best social-Darwinistic fashion. All this under the completely bogus assertion - un-demonstrated - that markets were self-regulating and self-correcting under all conditions. Smaller states that bought into this ideology whole-hog fell quickly (e. g., Iceland) while larger more diverse states, like the behemoth U.S., take decades for the distributed acquired wealth of the many to be extracted into the hands of the few.

In feudal times, the centers of elite power were geographic localities and thus, localism was the fact on the ground - a dismal violent brutal existence for the many - to be overcome in establishing functional states (first for the power of the king, then shared with the nobles, and finally, with the people). That dissimilarity, between then and now, is why most analysts are missing that larger similarity today. That is, they cannot see that it's the same class of people that are gathering wealth and power onto their persons and conglomerate "virtual estates" by extra-legal means - having had the laws changed to ignore their behavior, no matter what. Their actions not only cripple the power of the state incidentally, crippling of state power is pre-requisite to their goals - which, as in times of old, have no coordinated vision for the future of anything or anyone save their own aggrandizement and perpetuation at everyone else's expense.

To be sure, other variations of "virtual localism" are emerging in the form of multi-cultural assertions of special rights for special interests over everyone voluntarily abiding by the same rules-of-law, "state's rights" and libertarian movements in the U.S. seeking to reduce the Federal Government to minimum size and function - excepting a very offensive defense establishment, mico-economic thinking driving macro-economic policy etc.

Where's the IT angle? Damned if I know. Surely the digi-tech companies involved are not the limit of the problem. Maybe we should ask Paris.

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Paris Hilton

MinionZero Has It Right!

Harrumph !!!

Harrumph !!!

Harrumph !!! ...

and Paris is just the messenger...

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