Ruiz reportedly involved in insider trading case

Former AMD CEO Hector Ruiz has allegedly been linked to the largest hedge fund insider trading case in history, according to a report.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 10/28/2009

Top semiconductor industry executive Hector Ruiz has allegedly been linked to the largest hedge fund insider trading case in history, according to a Wall Street Journal (WSJ) report.

A criminal case announced by the Manhattan US Attorney's office and the New York Office of the FBI (Federal Bureau of Investigation) earlier this month charges that six individuals were involved in hedge fund insider trading schemes that together netted more than $20 million in illegal profits and concerned companies including AMD, IBM, and Intel. The case represents the first time that court-authorized wiretaps have been used to target significant insider trading on Wall Street.

As to AMD, the insider trading charges focus largely on Anil Kumar, a director at McKinsey & Company, a global management consulting firm; Raj Rajaratnam, the managing member of Galleon Management; and Danielle Chiesi, an employee of New Castle Funds, formerly the equity hedge fund group of Bear Stearns Asset Management. The three were arrested in New York by the FBI on October 16 and have claimed to be innocent. The remaining three defendants were also arrested.

The case alleges that the Wall Street employees gained confidential information from an unnamed AMD executive on the company's plans to spin its manufacturing operations, known as GlobaFoundries as of early October 2008. The move was expected by many on Wall Street to increase AMD's stock price as it significantly lowered operating costs.

According to the Manhattan US Attorney's office's filing, on August 15, 2008, Kumar told Rajaratnam that parties to a spin-off deal involving AMD had "shaken hands," and that Rajaratnam could "now just buy" AMD stock. Rajaratnam then allegedly shared the information with Chiesi. Then on September 11, 2008, Kumar told Rajaratnam that the deal involving AMD was "gonna be October, first week," according to the filing. The WSJ article claims that the unidentified source of the insider information passed among the defendants that lead to both personal profits and profits for their respective companies was Ruiz. The WSJ cited a "person familiar with the matter" as its source.

To be sure, Ruiz has not been charged by the Manhattan US Attorney's office or FBI, nor is he a defendant in the case. The filing documents also do not charge AMD or GlobalFoundries. As such, the WSJ noted that any possible legal responsibility Ruiz or the companies could face is unclear. The WSJ further noted that the filing documents also do not state that the unidentified source, claimed by the newspaper to be Ruiz, sought financial gains for allegedly passing along the insider information.

AMD is currently looking into the case. "We are investigating the situation, but we don’t have any more detail to discuss publicly," Drew Prairie, an AMD representative, told EDN via e-mail.  "No current or former AMD employee has been charged with a crime and we’re not aware of any allegation of criminal misconduct. It would be inappropriate to comment further on an ongoing Department of Justice investigation."

GlobalFoundries would not comment on the matter, saying that the allegations pre-date the launch of the company.

Ruiz was often hammered by press, stockholders, and analysts at events about AMD's plans to shed its manufacturing operations. At such events, the executive repeatedly refused to publicly comment on the matter prior to AMD's formal announcement of GlobalFoundries. Ruiz moved with GlobalFoundries to become its chairman. Since then, the company has snagged major customers including STMicroelectronics and moved ahead on a long-awaited Upstate New York fab that AMD had received state incentives to build.

Ruiz, who bootstrapped his way into one of the highest positions in the semiconductor industry as AMD's former CEO and chairman, joined AMD as president and COO in January 2000 and became the company's CEO in April 2002. He took a seat on AMD’s board of directors in 2000 and was appointed chairman of the board of directors in 2004.

Ruiz moved to AMD after serving in management positions at Texas Instruments in the company's research laboratories and manufacturing operations, and investing more than two decades at Motorola, where he held positions including president of the company's semiconductor products sector.

AMD in July 2008 announced that Ruiz would step down as CEO when the Sunnyvale, Calif-based microprocessor challenger announced a Q2 2008 $1.2 billion charge following a string of quarterly losses and massive layoffs at the company.

At that time AMD's board of directors elected then president and COO Dirk Meyer to president and CEO, succeeding Ruiz, who moved to the executive chairman seat of AMD and chair of the company’s board of directors.