Silicon Valley mystified by reports top executive Ruiz leaked company secrets

Oct 29, 2009 (San Jose Mercury News - McClatchy-Tribune Information Services via COMTEX) -- AMD | Quote | Chart | News | PowerRating -- The revelation that Hector Ruiz, former CEO of Advanced Micro Devices, allegedly leaked confidential information about his company in the biggest hedge-fund insider trading case in history has left many Silicon Valley colleagues shocked and mystified at his reported involvement.

"It just doesn't make sense," said Jerry Sanders, AMD's co-founder and the company's CEO before Ruiz assumed that job in 2002. "People make dumb mistakes -- talk show hosts having sex with subordinates, at least I understand the sex drive. I don't understand this. You just don't talk about things that aren't public. You don't talk to people about insider information, whether you benefit from it or not."

But Roger Kay of Endpoint Technologies Associates, which tracks the tech industry, speculated that Ruiz, if the charge is true, may simply have suffered from a syndrome that afflicts many of the rich and famous.

"Why would the super rock star or sports star do something totally bone-headed?" Kay said. "At some point, they felt, 'I'm master of the universe now.' When you reach that level, you don't see the boundaries that ordinary mortals see."

Reports Tuesday in both The Wall Street Journal and Bloomberg News identified the 63-year-old Ruiz as the unnamed AMD executive who federal documents say passed information to an alleged conspirator in the insider trading scheme. The case involves leaks from such Silicon Valley giants as Google and Intel to a group

of conspirators who bought and sold stocks, reaping more than $20 million in profits.

The information had to do with a multibillion-dollar deal AMD was negotiating with Abu Dhabi investors last year to spin off the Sunnyvale company's chip-making operations into a separate business entity called Globalfoundries, where Ruiz -- who has since left AMD -- now is chairman.

Ruiz, who declined to comment Wednesday through a spokesman, has not been formally charged and federal documents don't reveal a possible motive for his alleged involvement. He earned nearly $3 million in salary and other compensation from AMD last year and his current base salary at Globalfoundries is $1.15 million. No one has accused him of having earned a penny from the tips he allegedly provided.

Nonetheless, not profiting from an insider trading scheme doesn't necessarily shield an executive who leaks confidential company information from prosecution, according to Michael Li-Ming Wong, an attorney who was former chief of the white-collar crimes section of the U.S. Attorney's Office in San Francisco.

In addition, Wong said, the Securities and Exchange Commission could fine the executive and seek other financial penalties, as well as bar the person from being an officer or director of any public company.

The criminal complaint says that the information obtained about AMD was disclosed "in violation of duties and trust and confidence." That makes it appear to be a conventional case of insider trading where both the tipster and the recipient of the information could be guilty, even if one of them didn't trade on the information, said Robert Weisberg, Stanford law professor and expert on white-collar crime.

Aside from the possible legal consequences, leaking company secrets also is a clear violation of ethics at many corporations. AMD, for example, "has a strict policy against disclosing confidential information and trade secrets, and we expect all of our employees to comply with this policy," said company spokesman Michael Silverman.

Kirk O. Hanson, director of the Markkula Center for Applied Ethics at Santa Clara University, agreed.

While stressing he doesn't know anything about Ruiz, "the stories circulating in the past week are troubling," Hanson said. "What we can expect from our executives is a careful effort not to reveal obvious inside information, and a good-faith effort not to share isolated facts which might be key to someone seeking insider information."

Ruiz's alleged implication in the criminal conspiracy also might have some impact on Globalfoundries. As chairman, he isn't responsible for day-to-day operations there. But as Kay noted, "he certainly is a world-class figure" who has valuable high-tech connections that might be lost to Globalfoundries if Ruiz had to forfeit his position.

Ruiz isn't the only person at Globalfoundries allegedly linked to the case. Federal documents also claim that one of those charged, Anil Kumar, said in a wiretapped conversation last year that he planned to have lunch with the chief operating officer of another AMD spinoff, Spansion of Sunnyvale, and that, "I'll know much more after I meet him."

The Spansion chief operating officer at the time was Jim Doran, now senior vice president and general manager of Globalfoundries' manufacturing operations in Dresden, Germany.

Globalfoundries spokesman Jon Carvill said his company and Doran would not comment on the references in the complaint and it's unclear if Doran ever met with Kumar or what Kumar wanted to talk about.

All this has left many in Silicon Valley puzzled, including Nathan Brookwood, a research fellow at Saratoga market consulting firm Insight 64 who tracks chip companies.

"I'm at a loss," he said, when asked why Ruiz might have passed on confidential information. And Brookwood said it's possible much of what went on among those implicated may never be publicly revealed. "These are questions that only they can answer."

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