Last week I wrote about how the insider trading case involving hedge fund firm Galleon Group had taken on a larger than life scope, even in today's world of ongoing financial scandals and corporate donwfalls, because of the alleged involvement of IBM executive Robert Moffat. Now the case has taken on an even larger scope with the news that former AMD chief and current chairman Hector Ruiz was allegedly involved in the case.

Speaking with a few solution providers today, a few of whom hadn't even seen the news about Ruiz yet, I got the feeling that they were more than concerned about the prospect of a major scandal for the world's second biggest chip maker. System builders and solutions providers for the most part want a healthy, successful AMD. They believe that competition leads to quality, and then want to make sure that AMD keeps Intel honest and on the cutting edge.

But AMD could be in serious trouble. While Ruiz is no longer the CEO, he is still the executive chairman and is also one of the most respected and well-known figures in the IT industry. With apologies to Moffant and Intel's Rajiv Goel, a global investment director at the chip maker, Ruiz is by far the biggest name to become entangled in this scandal. The media spotlight has definitely moved away from Moffat, Goel and the four other hedge fund managers and is now centered squarely on Ruiz's head. Even though he has not been charged with a crime, Ruiz's association with this case could prove to be a major distraction.

AMD said it is reviewing the Wall Street Journal's report and also said in a press statement that the company is not aware of any criminal allegations or charges reharding current or former AMD employees. That's fine for now, but Ruiz will likely have to answer some hard questions soon. And that's not good news for the chip maker. Not only does the case put a cloud over the GlobalFoundries spinoff, but the controversy also overshadows the good news that AMD has enjoyed lately, including the release of its high-powered Radeon HD 5770 video card and the news that its graphics market share increased 30 percent in the third quarter. Whatever the case, it looks like AMD could be in for a miserable fall season.