Robert Moffat, 53, of Ridgefield, Conn., pleaded guilty to conspiracy to commit securities fraud and securities fraud, charges which carry a potential penalty of 25 years in prison.
A plea agreement, though, contained language indicating he may end up serving six months in prison or less.
Moffat, once considered a candidate for chief executive officer at IBM, was considered the highest level executive arrested in a case that resulted in 21 arrests. He is the 11th person to plead guilty. He remained free on $2 million bail. Sentencing was set for July 26. His lawyers said he was not cooperating with the government's probe.
During a hearing in U.S. District Court in Manhattan, Moffat told the magistrate in a shaky voice that he provided inside information between August and October 2008 to Daniele Chiesi, a friend and a co-defendant in the case. At the time, Moffat was senior vice president and group executive at International Business Machines Corp.'s Systems and Technology Group.
"I disclosed this information in this case intentionally and I knew that what I was doing was wrong," he said.
After the plea, Moffat's lawyer, Kerry Andrew Lawrence, released a statement saying his client "accepted responsibility for his conduct in improperly disclosing confidential information" to Chiesi.
The lawyer wrote that Moffat never engaged in any trading in connection with inside information he gave out and he received no money or other financial benefit in return.
"Mr. Moffat deeply regrets his conduct and is deeply sorry for the embarassment his conduct has caused to his family and to his former employer, IBM," the statement said.
Chiesi, 44, of Manhattan has pleaded not guilty to charges in the insider trading scheme that could carry a potential penalty of up to 155 years in prison. Chiesi worked for New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc. that had assets worth about $1 billion under management.
She has asked that her trial be severed from the trial of Galleon Group founder Raj Rajaratnam, 52. He too has denied securities fraud charges that were first brought in October.
Once described as one of wealthiest men in the United States, Rajaratnam remains free on $100 million bail. Charges against him carry a potential penalty of up to 185 years in prison.
Prosecutors say Rajaratnam may have made more than $50 million through improper securities trades.
In court papers filed in the case, prosecutors provided excerpts of transcripts of telephone conversations between Chiesi and Rajaratnam.
Chiesi and Rajaratnam were heard on a government wiretap of a Sept. 26, 2008, phone conversation discussing whether Moffat should move from IBM to a different technology company to aid the scheme, according to the papers.
"Put him in some company where we can trade well," Rajaratnam was quoted in the court papers as saying.
The complaint said Chiesi replied: "I know, I know. I'm thinking that too. Or just keep him at IBM, you know, because this guy is giving me more information. ... I'd like to keep him at IBM right now because that's a very powerful place for him. For us, too."
According to the court papers, Rajaratnam replied: "Only if he becomes CEO." And Chiesi was quoted as replying: "Well, not really. I mean, come on. ... you know, we nailed it."