Former AMD CEO Hector Ruiz Implicated in Insider Trading Scheme

Hector Ruiz served as CEO of AMD for nearly a decade and guided the company through both its strong success (Athlon 64) and lurching failures (paying $5.8 billion for ATI). He stepped down as CEO in July of 2008, after AMD reported its seventh consecutive quarterly loss, but became chairman of GlobalFoundries. That position could now be in jeopardy. The Assistant United States attorneys for the Southern District of New York have filed a complaint against the hedge fund Galleon Management. The fund is accused of trading on insider information, and Hector may have provided a great deal of it just before the GlobalFoundries spinoff.

According to the court filing, Daniel Chiesi of Galleon Management had several long conversations with Ruiz regarding the upcoming spinoff. Ruiz claimed the divestment would substantially reduce AMD's debt load and improve its competitive position. On the basis of this information, Galleon Management bought 199,400 shares of AMD on August 15, 2008, and a further 127,600 shares on September 30. AMD formally announced the spinoff on October 7, 2008. The formal court filing includes quotes from conversations between Danielle Chiesi and Raj Rajaratnam, controller of the hedge fund. As early as June, 2008, Chiesi was meeting with an unnamed AMD executive and reporting the details on AMD's negotiations with IBM (IBM had to agree to license its technology to GlobalFoundries in order for the spinoff to proceed.) In one conversation, Rajaratnam asks if the unnamed executive will provide Chiesi with "the full low down," to which Chiesi replies "Oh yeah. Plus, IBM will too."

Further details in the brief (available here) indicate that Chiesi met with the unnamed executive and Robert Moffat of IBM multiple times, and was aware of the specific details of the spinoff by August 15. Yesterday, the Wall Street Journal announced that Hector Ruiz was the unnamed AMD executive, a fact that, if true, implicates him as an inside trader. Ironically, it might not matter. In an odd twist of fate, Galleon's inside trading appears to have benefited no one. The expected jump in AMD's stock price never appeared, The stock rose slightly in early October, from $5.31 a share to $6.25 on October 14, but closed yesterday at $4.85 (currently trading at $4.97). Furthermore, there's no evidence that the unnamed AMD executive, whoever he or she was, was ever compensated for the information.

Ruiz has not yet been accused of criminal misconduct or named as a person of interest in the investigation, If he is, it could jeopardize his position at GlobalFoundries, and possibly trigger an in-depth investigation of both AMD and GF. That's a distraction neither company needs at the moment—it would be best for all concerned for Ruiz to walk away with his hands clean on this one.
3vi1 5 years ago

I don't think you guys are being impartial and objective here:

Why is there zero mention in this article of Rajiv Goel and Intel Capital (Intel's investment wing)? Goel was *arrested* in connection to this case weeks ago, whereas Ruiz hasn't even been accused of anything yet.

I know you guys are good friends with Intel, but the blatant omission (and lack of any reporting on the more concrete happenings of the 16th) plus the insulting picture, makes this come off as some kind of anti-AMD smear.

gibbersome 5 years ago

Wasn't there an article posted about IBM/Intel already?

I don't think there's bias, but Joel did miss a trick by not including other companies, to paint a broader picture of the corruption in the tech sector.

3vi1 5 years ago

No, there wasn't an article about IBM/Intel - You're thinking of the note that I posted in the forums when that occurred.

rapid1 5 years ago

Well either way none of this matters unless he was paid specifically by the investment firm, and paid by the investment firm for it to be insider trading. Generally someone has to benefit and that benefit be proven. Is an investment form asks for your comments on something, and you give them freely with no proven gain who did anything wrong. I mean if you had a new beach house, car, plane, huge jump in your bank account it could be valid. However; if none of this occurred, and can be proven it means nothing.

digitaldd 5 years ago

LOL @ the cross-eyed picture in the post. Yes

3vi1 5 years ago

Really? Why is the photoshopped pic of a former AMD CEO, made to be insulting, so great?

It's easy to find pictures of Kurland and Rajaratnam being led away in handcuffs, but this is the best pic to use?

Don't get me wrong - I totally agree that Intel has the best processors available right now, but I don't like kicking a dog when it's down... especially when there's no evidence or charges that it's rabid. :\

Trust me, Intel (who's investment wing has been found neck deep in this) would not be half the company they are without strong competition.

Post a Comment
or Register to comment