Advanced Micro Devices (AMD)'s former CEO, Hector Ruiz, allegedly leaked details of a major restructuring to a hedge fund. But I was even more surprised to learn the details of what Ruiz allegedly told New Castle's Danielle Chiesi, the former Bear Stearns hedge fund executive -- details which she passed along to Raj Rajaratnam, the head of Galleon Group, the one-time $3.7 billion hedge fund, who's been accused of insider trading and is now out of prison on $100 million bail.

Before getting into the details of what Ruiz leaked, another amazing report came out on the hundreds of millions that Galleon paid banks for so-called "market color." FT.com reports that Galleon paid banks like Goldman Sachs Group (GS) and Morgan Stanley (MS) a total of $250 million in exchange for information about big buyers or sellers of a security (I wrote about that here). This information is treated differently by insider trading rules because that data is not provided by corporate executives.

But the information that Ruiz allegedly provided definitely fits that corporate issuer requirement. BusinessWeek reports prosecutorial allegations that Ruiz provided Chiesi with an extremely detailed accounting of the AMD restructuring months before they were announced to the public. This deal, which spun off AMD's chip manufacturing into a company called Globalfoundries, was financed with $8.4 billion from Abu Dhabi. But in late August 2009, that spin-off had yet to happen and Chiesi was pumping Ruiz for details about the pending deal.

For example, on August 26th, Chiesi asked how much debt would be left at AMD after the spin-off and whether the deal would be announced before government approval. In taped recordings of the call between Chiesi and Ruiz, he tells her that most of AMD's debt would be transferred to Globalfoundries and that the announcement would come before the U.S. approved it.

She also asked whether the deal would be announced in September, to which Ruiz answered yes. As it turns out, the deal was not announced until October 7th -- but the details that Ruiz shared with Chiesi suggest that he either did not think there was anything wrong with what he was doing, or he was totally convinced that he would never get caught.

As I wrote earlier, the most amazing thing about Ruiz's alleged actions is that he got nothing in return for his information. But now I am convinced that he got something -- it's just that we don't yet know what that something is.

While it is not impossible to imagine that a CEO would engage in insider trading, it defies all understanding that he would risk his fortune and freedom to do so just out of the kindness of his twisted heart.

Peter Cohan is a management consultant, Babson professor and author of nine books, including Capital Rising (due in June 2010). Follow him on Twitter. He has no financial interest in the securities mentioned.


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