IBM acted unethicaly and damaged Sun
H. Insider Trading in SUN
84. Moffat, IBM's Senior Vice President and Group Executive, Systems and
Technology Group, conveyed to Chiesi material nonpublic information about SUN's Q2
2009 results in advance of SUN's January 27,2009 earnings release.
85. In January 2009, IBM was conducting due diligence on SUN in
contemplation of a possible acquisition by IBM ofSUN. Pursuant to a confidentiality
agreement between IBM and SUN entered into as part of that process, SUN provided
IBM with its Q2 2009 earnings results in advance of the January 27, 2009 announcement.
Moffat was involved in IBM's due diligence of SUN, and as a result had access to SUN's
86. Chiesi and Moffat, who are friends, contacted each other repeatedly during
January 2009, with the frequency of contact between the two increasing significantly just
prior to the SUN earnings release.
87. Moffat was one of a group ofIBM executives on the preliminary due
diligence team arriving at a designated location to conduct due diligence on SUN on
January 19, 2009. Moffat contacted Chiesi at home that evening, and had several
conversations with her over the next several days. In the course of one or more of these
conversations, Moffat provided Chiesi with material nonpublic information concerning
SUN's Q2 2009 earnings.
88. On Monday, January 26, New Castle began acquiring a substantial long
position in SUN. On January 27,2009, after the market close, SUN reported its Q2 2009
earnings information. SUN's performance substantially exceeded consensus estimates,
including higher revenue and margins, posting a $0.02 per share profit whereas consensus
estimates called for a loss of $0.09/0.1 0 per share. SUN's shares rallied on the news,
rising 21 %, from a January 27 close of$3.99 per share to a January 28 close of $4.86 per
share, generating profits of nearly $1 million for New Castle.
89. On January 28,2009, Moffat transmitted to SUN, on behalf of IBM, a
preliminary proposal to acquire SUN.
90. Moffat also tipped Chiesi to material nonpublic information about IBM's
quarters ending December 2008 and March 2009 that he obtained by virtue of his
position at IBM, and Chiesi traded on the information she received from Moffat on behalf
ofNew Castle. Finally, Moffat tipped Chiesi to material nonpublic infoITIlation about the
AMD Transactions described immediately below that Moffat obtained by virtue of IBM's
participation in the deal, and Chiesi traded on the information she received from Moffat
on behalf of New Castle.
Now we know who probably leaked the merger information and damaged Sun and its shareholders.