The secondary rumbles from the Gallen Management hedge fund scandal that shook AMD and the rest of the Silicon Valley this week, included the stunning news that a straight-arrow like Hector Ruiz, the company's former CEO, would be involved in insider trading.

While Ruiz's tenure with AMD (NYSE: AMD) did not end well at all – he fell on his sword after several consecutive quarters of severe losses and the Barcelona processor was more than a year late, harming AMD's relationship with OEMs –Ruiz had a solid reputation as an honest player, not given to this kind of activity.

"It just doesn't make sense," said Jerry Sanders, AMD's co-founder and CEO before Ruiz assumed that job in 2002, in an interview with the San Jose Mercury News. "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."

The news first hit earlier this week in both The Wall Street Journal and Bloomberg News. Ruiz, now Chairman of Globalfoundries, the chip manufacturing company that spun out of AMD and took AMD's fabs with it, was accused of passing information to members of a hedge-fund under investigation for insider trading.

The information had to do with AMD's deal with Abu Dhabi investors last year to spin off the fabs and create Globalfoundries. The deal was hardly a secret; many chip analysts and journalists alike speculated for months that AMD would do what it did. The particulars, like the $2.1 billion investment from the Advanced Technology Investment Company (ATIC) of Abu Dhabi, were not known.

The criminal complaint says that the information obtained about AMD was disclosed "in violation of duties and trust and confidence." That would look like a textbook case of insider trading, but no one has accused Ruiz of having earned a penny from the tips he allegedly provided, nor could they, as AMD's stock has been in a free-fall, only just recently recovering from its low of $1.62.

While it doesn't excuse the behavior, it may get Ruiz off the hook with just mud on his face and his good name. "Insider trading you lose money on, I'm not sure how that's an advantage. Penalties are based on how much you make. If you lose money does that mean the government writes you a check?" joked Rob Enderle, principal analyst with The Enderle Group.

"That's one way to look at it," countered Scott Testa, professor of Business Administration at Cabrini College in Philadelphia. But that's no excuse, he argues. "There was insider info and they tried to use it to their advantage and they lost money, but at the end of the day there's still manipulation of the markets, so even though they lost money that doesn't mean what they did wasn't illegal."

No evidence of criminal misconduct?

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AMD is not saying much on the issue.

"We are investigating the situation, but we don’t have any more detail to discuss publicly. No current or former AMD employee has been charged with a crime and we’re not aware of any allegation of criminal misconduct. It would be inappropriate to comment further on an ongoing Department of Justice investigation," said an AMD spokesperson in an e-mail to InternetNews.com.

Enderle believes Ruiz simply spoke out of turn. "He'd been getting heat for not doing anything as CEO, I think he wanted to share this info of what he was doing as CEO," he said. "My take is I think these execs got kind of excited about what they were doing and shared the info with the wrong people. There's no evidence [Hector] financially benefited."

Testa doesn't buy it, saying most chief executives are pretty cautious in their statements. That said, he and Enderle do agree on one thing: Ruiz is hardly going to fry over this.

"They may say 'you have a fine and cut us a check and let's go on our way.' I don't see them making him a scapegoat. I could be wrong, but he lost money, is no longer serving [as CEO]. He's not the golden ticket," said Testa.