Monday, June 24, 2024

IBM Deals With EU Complaint, Insider Trading Settlement

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It’s going to be a very busy week in IBM’s legal department. It has been accused of antitrust activities by a French software company and an executive caught in an insider trading scandal may be close to settling his case.

TurboHercules, a provider of mainframe emulator software in Paris, France, filed an antitrust complaint with EU regulators on Tuesday, charging IBM (NYSE: IBM) with refusing to license its mainframe operating system for use with TurboHercules’s mainframe emulator.

“IBM is preventing customers from using Hercules [TurboHercules’ open-source software] by tying IBM’s mainframe operating system with IBM hardware,” Roger Bowler, TurboHercules chairman, said in a statement, quoted by Reuters.

In a blog post, Bowler said its complaint was in response to charges by an IBM executive that TurboHercules was guilty of patent infringement.

“It is for this reason that TurboHercules has reluctantly taken the step of filing a complaint asking the European Commission to restore free and fair competition to the IBM mainframe market. Mainframe customers should be permitted to run the applications and data that they own, and in many cases developed, on the computer hardware of their choice,” Bowler said in the post.

IBM denied it’s done anything illegal.

“TurboHercules is an ’emulation’ company that seeks a free ride on IBM’s massive investments in the mainframe by marketing systems that attempt to mimic the functionality of IBM mainframes,” IBM said in a statement quoted by Reuters.

“This is not really any different from those who seek to market cheap knock-offs of brand-name clothing.”

The computer and service giant already faces antitrust chargesfrom a complaint filed by Tampa, Fla.-based T3 Technologies last year with the European Commission back in January of last year.

T3’s charge also involved IBM’s mainframe business. The company accused IBM of engaging in a range of anti-competitive actions, including preventing the sales of competing mainframe hardware products by tying the sale of its operating system to its mainframe hardware. It also accused Big Blue of withholding patent licenses and certain intellectual property to the detriment of mainframe customers.

An IBM spokesperson said at the time T3 made its complaint that the company was confident it was not in violation of competition laws. But later in October of last year, the U.S. Justice Department announced it had opened an antitrust inquiry into IBM’s mainframe business practicesfollowing allegations the company had systemically sought to squeeze out potential competitors to its lucrative mainframe business.

Insider trading settlement?

Meanwhile, in an unrelated development, former IBM senior executive Robert Moffat is expected to plead guilty to charges in the Galleon hedge fund insider trading case, according to a court document filed on Tuesday.

IBM placed Moffat on leave last October after he was arrested for his alleged role in the massive insider trading scandal. Moffat held a prominent position at IBM, where he headed its systems and technology group and was once considered a possible candidate for the CEO spot.

Moffat was arrested and charged with fraud last Oct. 16 along with other defendants that included Galleon Group founder Raj Rajaratnam and former New Castle Funds LLC trader Danielle Chiesi. Rajaratnam’s Galleon was a $3 billion-plus hedge fund.

According to a filing in Manhattan federal court by prosecutors, quoted by Reuters, the U.S. Attorney’s Office will file an “alternative charging document” upon the defendant’s waiver of indictment. Moffat’s attorney confirmed his client was prepared to waive indictment, though no date has been scheduled for a court appearance.

Ten other defendants in the case have so far waived indictment and pled guilty to “criminal information” (another term for the alternative charging document which usually indicates the defendant has agreed to plead guilty).

The original affidavit in the case filed in New York claimed Moffat and other co-conspirators exchanged information about a number of high-profile technology stocks including AMD, Intel, Akamai Technologies, Google, Clearwire, Hilton Hotels, PeopleSupport, Polycom and Sun Microsystems.

David Needle is the West Coast bureau chief at, the news service of, the network for technology professionals.

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