Updated on October 23 at 3:00 p.m. PDT: with additional information identifying the person who is talking to the "AMD executive" and additional statements.
An unnamed executive at Advanced Micro Devices is cited repeatedly in the Galleon Funds insider-trading case, presenting a potentially awkward situation for the chipmaker as the case goes forward.
It's not clear if the AMD executive cited in the U.S. Attorney's complaint would be charged or even implicated by name, but government charges of insider trading have rattled Silicon Valley. Rajiv Goel, a managing director of strategic investments for Intel's treasury group, was arrested and charged in the case and put on leave, forcing Intel CEO Paul Otellini to publicly address the case.
And a high-level executive at IBM, senior vice president Robert Moffat, was placed on leave Monday after he was charged. Moffat is accused of supplying details about IBM and Sun Microsystems earnings to Danielle Chiesi, who worked for the New Castle hedge fund.
"If it's the top two (executives at AMD), that would be significant. But it could be anyone. Mid-level executives. We don't know," said David Wu, an analyst at GC Research.
"We are currently reviewing the situation and we have no further comment," AMD spokesman Michael Silverman said.
The case revolves around Raj Rajaratnam, who founded the Galleon Group, a New York-based hedge fund that manages $7 billion in funds. Federal prosecutors charged Rajaratnam and five others on Friday with securities fraud, alleging they were involved in insider trading of well-known tech companies, including Intel, Google, AMD, and IBM.
In the wake of the allegations, the Galleon Group said it will close, though the firm is exploring alternatives for its business that could allow parts of the hedge fund to survive, according to the Wall Street Journal.
AMD was prominent in the complaint, filed by the U.S. Attorney for New York's Southern District on Friday, which alleges Rajaratnam and others engaged in insider-trading activity when AMD was trying to reorganize and spin off its manufacturing operations last year--which eventually became a multibillion-dollar deal.
The U.S. Attorney's complaint makes the first references to an AMD executive in June of 2008. At that time, AMD, seeking a buyer for its manufacturing operations, entered into negotiations with investors based in Abu Dhabi.
Throughout the AMD section of the complaint, references are made to the executive, usually in the context of a person (see note below) who had spoken with the executive. For example, Rajaratnam asked whether the AMD executive would give the person (who spoke with the AMD executive) "the full low down" on the reorganization, and the person replied, "Oh, yeah. Plus IBM too." IBM was involved in the deal because AMD was using intellectual property from IBM in its chip design and manufacturing processes.
And as the announcement of the spin-off got closer, the person told Rajaratnam that the "AMD executive said that the deal would be announced during the first week of October," adding that the AMD executive had described the deal as "unbelievable."
Also, in the government's (separate) complaint against New Castle's Chiesi it is alleged that "she had spoken with the AMD Executive, who told her that 'Wall Street will be shocked,' and that AMD will 'definitely make the announcement...before they print [quarterly earnings].'"
The spin-off was ultimately announced on October 6 when an investment was secured from Advanced Technology Investment and Abu Dhabi-based Mubadala Development. At that time, AMD said the new company had secured about $5.7 billion of "confirmed, pledged investment."
Though AMD's stock price rose briefly--about 25 percent--the price then dropped precipitously because of the financial crisis on Wall Street. AMD's stock price fell from $7 in June 2008 to $2.10 on December 8.
Note: The person allegedly talking to the AMD executive is identified as New Castle hedge fund's Danielle Chiesi in a separate government complaint against Chiesi, New Castle Fund's Mark Kurland, and Moffet.