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01.08.09

SEC Goes Hunting Microsoft Again, Violations Alleged

Posted in Finance, Fraud, Microsoft, Novell at 7:36 pm by Dr. Roy Schestowitz

“Microsoft’s perspective is best reflected by Bob Herbold, Chief Operating Officer, to whom the CFO reports. Bob very sincerely replied, “Bill, everyone is doing it.” My response was that Microsoft is a leader and that others are now seeking to emulate these fraudulent practices they have legitimized. Naturally Bob was not pleased by this perspective and that was our final conversation. A second informal response came when Microsoft asked PR Newswire to stop issuing my press releases.

“Microsoft is PR Newswire’s largest client.”

Bill Parish

IN THE WORDS of Yogi Berra, it’s deja vu all over again.

US ‘renews’ Microsoft share probe

The US financial watchdog, the Securities and Exchange Commission (SEC), has reopened an insider trading inquiry into Microsoft, reports say.

This is not the first time that the SEC steps in because of allegations of fraud against Microsoft (the company settled to escape this previous blunder). With Satyam all over the headlines for massive fraud, this sure could get interesting. Might Novell be next? The SEC doesn't spot it and it's already seen as fishy by some.

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10 Comments

  1. The Mad Hatter said,

    January 8, 2009 at 11:25 pm

    Gravatar

    The SEC has over the last 8 years been somewhat toothless. It will be interesting seeing if anything changes with the change of administration in the US.

    That said, I don’t think that Microsoft is the only company doing this. Over the last 20 years I’ve noticed more businesses doing things that are legally questionable, and this seems to be a problem across a wide range of industries. It seems like the chase for profit has corrupted management.

    Of course this is only what I see. I know that the businesses in question will claim that they are acting legally, that everything they have done is proper, that they are only trying to protect shareholder equity, however it does not look like this to me.

  2. AlexH said,

    January 9, 2009 at 3:35 am

    Gravatar

    @Mad Hatter: in cases like this, which is insider dealing perpetrated by individuals, the SEC have generally had a decent track record.

    Institutional – and particularly multi-national – problems they’ve found harder, but then, they have a much better record than practically any other agency on earth because they reward tattle-tales with lenient treatment. See, for example, Enron, Virgin vs. BA, or any other numerous “big” frauds.

  3. Roy Schestowitz said,

    January 9, 2009 at 3:41 am

    Gravatar

    Even a Vice President at Microsoft was recently accused.

    Microsoft exec dumped stock prior to Red Ring announcement

    To make matters more murky, the sales were not registered with the Securities and Exchange Commission within the mandatory two days of the transaction, a result of an alleged “administrative error.” Microsoft has since remedied the issue by following the “procedures required of late-filers.”

    Microsoft’s Bach sold more stock before Xbox news

    Microsoft Corp. executive Robbie Bach sold $3 million more in company stock during the period leading up to an announcement about a costly flaw in its Xbox video game console than previously reported, according to a filing Monday with the Securities and Exchange Commission.

    Insider Trading Hasn’t Affect Microsoft Stock – Yet

    MarketWatch.com reports that Robbie Bach, president of Microsoft’s Entertainment and Devices division, sold $6.2 million of Microsoft stock just prior to announcing that Microsoft was going to have to extend XBox 360 warranties to three years because of extensive failures. The filings note that this was not part of any scheduled diversification or selling program; this was a conscious, unscheduled sale by the guy in charge of releasing news that could affect the value of Microsoft stock.

    [...]

    Insider trading is a very serious violation of the law; just ask Martha Stewart, who served five months in prison for avoiding losses of $43,000 through trades that just had suspicious timing (no insider trading was actually proven). This is $6.3 million that went straight into Robbie Bach’s pocket.

  4. AlexH said,

    January 9, 2009 at 4:00 am

    Gravatar

    @Roy: well, as your articles state, if he did it deliberately then they will catch him, because he has to register all his trades.

  5. Roy Schestowitz said,

    January 9, 2009 at 4:10 am

    Gravatar

    The SEC was asleep. I wrote about it extensively at the time and also addressed a a question at Bach (last week).

  6. AlexH said,

    January 9, 2009 at 4:26 am

    Gravatar

    Given they were the ones who found it, they were hardly asleep.

    What you mean is you wanted them to find him guilty.

  7. Roy Schestowitz said,

    January 9, 2009 at 4:43 am

    Gravatar

    I don’t think he was ever investigated or acquitted. I watched it closely.

  8. AlexH said,

    January 9, 2009 at 4:51 am

    Gravatar

    Difficult to see how you would know if the SEC investigated him or not.

    Also, you can’t be acquitted until you’re actually charged with something, and Bach was never charged with insider dealing. Selling shares in the company you work for isn’t automatically insider dealing.

  9. Roy Schestowitz said,

    January 9, 2009 at 4:53 am

    Gravatar

    Read the articles again, please.

  10. AlexH said,

    January 9, 2009 at 4:56 am

    Gravatar

    I’ve read the articles already, thanks. If you have a point, make it.

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