Man confesses about IBM/Lotus share deal

A US citizen has confessed that he had inside information about IBM?s acquisition of Lotus two years ago, allowing him and others to buy shares at a price that doubled after the deal was concluded.

Robert Kowalskie was not convicted of insider trading in a US court last week, but instead was charged under an obscure clause of federal law that prevents him ?telling his friends to lie? to US financial regulator the Securities & Exchange Commission (SEC).

Kowalskie also admitted to a federal court that he had previously lied to the SEC about his share dealings.

The US views breaches of confidentiality seriously and the defendant could receive up to five years in jail and a fine of $250,000 for the offence. One of Kowalskie?s friends admitted that he lied to the SEC in April and is still awaiting sentence.

Kowalskie has been released on $50,000 bail. He is understood to have made more than $100,000 by knowing information about the proposed deal between IBM and Lotus.

IBM bought Lotus two years ago in a deal worth over $3.3 billion. IBM proposed buying Lotus? entire stock at $60 per share when it was trading at $32.50 (PC Dealer, 7 June 1995).

The size of the bid from IBM surprised analysts at the time and they claimed the price was too high. But others claimed it had pitched the price at the right level to deter counter bids.