Power + Knowledge ≠ Wisdom: The Fall of an IBM Executive

Early in 2001, I rode the IBM corporate helicopter to accompany senior executives, of a large insurance company, to a meeting at the executive wing at IBM’s headquarters in Armonk, NY.  Waiting for us, in his own, personal, conference room, was Sam Palmisano, then president of IBM.  Also waiting in the conference room was Robert Moffat, then head of IBM’s PC business.

The meeting did not go well.  The customer had issues with IBM’s PC products and had a strong preference for a competitor.  Ultimately, Mr. Palmisano took issue with a comment from one of the customer executives, made some, mostly unrepeatable, comments and stormed out of the room.  This left Mr. Moffat as the presiding IBM executive.  He was not comfortable and stayed largely quiet.  He was not a salesman and chose, only, to interject comments when statistics were called for.  He was definitely a numbers man.

Being a virtual repository of data made Moffat invaluable to his mentor, Palmisano.  When Palmisano took over as CEO, Moffat was elevated to take over IBM’s supply chains, integrate them and make them into a smooth and efficient machine.  Being a numbers man made him ideal for the job. 

Sir Francis Bacon wrote: “Knowledge is Power.”  Unfortunately, knowledge plus power does not equal wisdom.  In 2002 Moffat became acquainted with Danielle Chiesi, a hedge fund analyst.  A brief introduction turned into a business friendship and, eventually, into an affair – Moffat is married with children.  Chiesi “played” Moffat, with her feminine wiles, for confidential information that resulted in illegal trades valued $50 million, and profits of nearly $29 million, for her, other, confidants who were hedge fund executives.  Moffat made no money personally.

Moffat and the others were caught by wire taps.  Upon his arrest in 2009, Moffat’s IBM colleagues scattered and distanced themselves, including Palmisano.

William Shakespeare wrote:

When Fortune in her shift and change of mood

Spurns down her late beloved, all his dependants

Which labour’d after him to the mountain’s top

Even on their knees and hands, let him slip down,

Not one accompanying his declining foot.

This epitomizes Moffat’s experience, with the addition of a six month prison sentence and a $50,000 fine.  Instead of being heir apparent to the CEO position at one of the world’s largest and most respected corporations, Moffat heads off to jail with the label as a purveyor of information in the “biggest hedge fund insider trading case in history.”  Let the powerful beware.