Questions Surround Ex-AMD CEO's Alleged Galleon Link

LOS ANGELES/SAN FRANCISCO (Reuters) - The linking of Advanced Micro Device's former top executive to the largest U.S. insider trading scheme in decades may raise questions about its business practices -- and that of the chipmaking venture, Globalfoundries, that it spun off.

AMD and Globalfoundries -- launched in 2008 and considered an unlikely contender to heavyweight rivals TSMC and UMC of Taiwan -- can ill afford a major legal and corporate distraction as the contract chipmaker tries to secure a foothold in a fiercely competitive sector.

Shares in AMD, which owns a large but minority stake in the venture with Abu Dhabi investors, slid 1.9 percent in slow after-hours trade after the Wall Street Journal reported Hector Ruiz had passed on confidential information regarding the spinoff to a hedge fund manager when he was AMD's CEO.

Ruiz is now chairman of Globalfoundries.

The 63-year-old Mexico-born tech veteran -- sometimes called "Uncle Hector" in Internet chatrooms but criticized for allowing AMD to hemorrhage market share to Intel -- became the biggest name to be linked to the widening scandal orbiting Galleon, which has traumatized Wall Street.

Citing a person familiar with the matter, the newspaper reported Ruiz was the unnamed AMD executive accused in a criminal case, filed by the Manhattan U.S. attorney's office, of sharing information regarding the complex manufacturing operation's spinoff to a portfolio manager.

Ruiz had no comment when contacted through a spokesman.

AMD says it is unaware of any allegations of criminal misconduct regarding its current or former employees, while Globalfoundries said it had not been contacted by any government agency in relation to the case.

"Oh my," said JMP Securities analyst Alex Gauna. "Well, I guess the good news is that he has been in a diminished role from what he was. But the bad news is, that it's not a zero role."