08.26.08

Gemini version available ♊︎

Financial Fraud Claimed at Microsoft; Microsoft Paid Microsoft Witness to Shut Up

Posted in Finance, Fraud, Microsoft at 6:28 am by Dr. Roy Schestowitz

The following old article is hugely damaging and we are fortunate to have found a copy of it in the Web Archive. It vanished from the Seattle Weekly.

This article, which is titled “Microfraud?”, provides a testimony from a Microsoft insider who claims financial fraud. Interestingly enough (but not so surprisingly), Microsoft paid him a fortune to go away, keep quiet, and for the terms of the settlement not to be disclosed (recall Iowa and Caldera for similar examples).

Here are the opening paragraphs from this article.

THE ALLEGATIONS WERE shocking: For years, Microsoft has systematically distorted its profit figures in an effort to consistently beat Wall Street expectations and keep its stock price steadily rising. The false reports would violate SEC regulations, and amount to outright fraud.

More shocking was the source of the allegations: Microsoft’s chief of internal audits, Charlie Pancerzewski, who reported directly to the company’s chief financial officer.

Most shocking of all was what happened to Pancerzewski when he reported the suspicious bookkeeping to his supervisors, Microsoft CFO Mike Brown and chief operating officer Bob Herbold, in the spring of 1995. Soon afterward, Pancerzewski—who for nearly five years had received stellar performance evaluations—received his first-ever unsatisfactory one, and was eventually forced to resign.

Two months ago, Microsoft quietly settled a lawsuit containing these allegations, filed in 1997 by Pancerzewski under the Whistleblowers Protection Act. The auditor claimed he was wrongfully terminated after telling his supervisors that Microsoft might be breaking securities and tax laws. The lawsuit made its tortuous way through several rounds of pretrial motions until last fall, when US District Judge Carolyn Dimmick denied Microsoft’s final plea for summary judgment, finding credible evidence that Microsoft may have violated SEC rules, as Pancerzewski alleged. Shortly thereafter, Microsoft and Pancerzewski settled out of court. Terms of the agreement were sealed, but one source who claims familiarity with the case says that Microsoft paid Pancerzewski $4 million.

Microsoft is claimed to have lost $18 billion in 1998. That is another article that magically vanished, but we managed to find a copy.

More recently, one financial manager from Microsoft was prosecuted for embezzlement [1, 2, 3]. If the legal system is functional, more Microsoft employees might need to be put in prison and it goes all the way to the top (managers). One of them ended up jailed about a month ago. There are other examples, such as Robert Bach, a Microsoft chief who was accused of inside-trading [1, 2]. There was never a trail, but there sure was evidece.

Novell, for that matter, is no saint, either. Novell too is said to be cooking its books, but the SEC does not see it.

There is a lot of investigation to do on this, and we shall continue to do it. Please post any corrections you may have so that we don’t make improper accusations.

Share in other sites/networks: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Reddit
  • email

Decor ᶃ Gemini Space

Below is a Web proxy. We recommend getting a Gemini client/browser.

Black/white/grey bullet button This post is also available in Gemini over at this address (requires a Gemini client/browser to open).

Decor ✐ Cross-references

Black/white/grey bullet button Pages that cross-reference this one, if any exist, are listed below or will be listed below over time.

Decor ▢ Respond and Discuss

Black/white/grey bullet button If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

4 Comments

  1. julian67 said,

    August 26, 2008 at 9:49 pm

    Gravatar

    The page referenced hasn’t vanished at all.

    It’s available at http://www.seattleweekly.com/1999-01-06/news/microfraud.php and dates from 1999. I accessed it without difficulty.

    It relates that most of the allegations were proven unfounded “Judge Dimmick threw out most of Pancerzewski’s allegations (including the European tax issue and a separate age discrimination claim) for lack of evidence, but left it for the trial to determine the truth of his charge that Microsoft fraudulently “borrowed” from its cash reserves in relatively lean reporting periods and hoarded cash in the reserves during fatter times, in order to give a more orderly appearance to its earning pattern.”

    No report of any resulting adjudication is made.

  2. Cypress said,

    August 26, 2008 at 11:44 pm

    Gravatar

    Excellent article. It’s nice to see that people don’t forget and that not everything can be buried and forgotten. :)

  3. Sander Marechal said,

    August 27, 2008 at 1:52 am

    Gravatar

    Roy, please do what Eric S. Raymond did.

    Make a copy of those relevant articles. Then publish the article here *in full* but with enough of your own comments mixed in that it falls entirely under fair use. See the Halloween FAQ at http://www.catb.org/~esr/halloween/faq.html point “Would you please make un-annotated versions available?”.

    If external articles are important then it’s worth making copies. It keeps the information from disappearing from under our feet.

  4. Roy Schestowitz said,

    August 27, 2008 at 11:46 am

    Gravatar

    Update: in USENET, Rex Ballard has posted the following response:


    Message-ID: <d7e98c92-d352-4e27-a4f9-179712da3ad3@26g2000hsk.googlegroups.com>
    From: Rex Ballard <rex.ballard@gmail.com>
    Newsgroups: comp.os.linux.advocacy
    Subject: Re: [Old] Microsoft is a Financial Fraud (Like Enron), Says Top Microsofter!
    Date: Wed, 27 Aug 2008 09:29:48 -0700 (PDT)

    > Microfraud?
    > ,—-[ Quote ]
    > | THE ALLEGATIONS WERE shocking: For years, Microsoft has systematically
    > | distorted its profit figures in an effort to consistently beat Wall Street
    > | expectations and keep its stock price steadily rising. The false reports
    > | would violate SEC regulations, and amount to outright fraud.

    This wasn’t such a big surprise, but the Clinton Administration wasn’t
    interested in investigating securities fraud that publicly. They
    understood that even the RUMOR of an SEC investigation could trigger
    panic around that stock, then that industry, and finally the entire
    market.

    The Bush administration put Harvey Pitt in charge of the SEC, and
    Harvey wanted to make a name for himself by initiating a bunch of very
    public investigations of former Bush supporters who didn’t come
    through for George W Bush when needed. The offenses were often less
    than 1% but the public investigation triggered panic selling that
    crashed 98% of the value of the stock, with WorldCom investors left
    with nothing, over a 1% irregularity.

    But the Bush Administration had zero interest in prosecuting
    Microsoft, who had made a number of political contributions, AND a
    number of contributions to charities suggested by Carl Rove and Jack
    Abramhov. Microsoft could have inflated it’s numbers by 25% but Bush
    wasn’t even going to enforce the actual judgement against Microsoft
    that they already had. Microsoft’s executives admitted under oath, in
    depositions, and in email divulged during discovery that they
    routinely engaged in fraud, extortion, blackmail, sabotage, and
    obstruction of justice, but the Bush Administration felt “Companies
    should have a right to profit from their innovations”. McCain has
    made an identical statement – I wonder how much Microsoft gave to the
    “streight talk express” and it’s puppet charities, and whether McCain
    is aware of how owned he is.

    Even though there have been something like 9,000 complaints against
    Microsoft and specific anticompetitive business practices, the DOJ has
    packed the “Technical committee” with Micrososft friendly members, so
    they don’t see anything wrong. And the DOJ itself tries to overrule
    several other states and say “There’s not a problem”.

    > | More shocking was the source of the allegations: Microsoft’s chief of
    > | internal audits, Charlie Pancerzewski, who reported directly to the company’s
    > | chief financial officer.

    And he reported the irregularities back in 1997, when nobody cared.

    > | Most shocking of all was what happened to Pancerzewski when he reported the
    > | suspicious bookkeeping to his supervisors, Microsoft CFO Mike Brown and chief
    > | operating officer Bob Herbold, in the spring of 1995. Soon afterward,
    > | Pancerzewski—who for nearly five years had received stellar performance
    > | evaluations—received his first-ever unsatisfactory one, and was eventually
    > | forced to resign.

    Yep. Microsoft was probably the leader in that corporate disease that
    made examples of a few
    “trouble-makers” who “weren’t team players” and “didn’t have the
    company religion”. It’s a good
    way to keep the others who know about the “little problem” from
    getting any “dangerous ideas”.

    > | Two months ago, Microsoft quietly settled a lawsuit containing these
    > | allegations, filed in 1997 by Pancerzewski under the Whistleblowers
    > | Protection Act. The auditor claimed he was wrongfully terminated after
    > | telling his supervisors that Microsoft might be breaking securities and tax
    > | laws. The lawsuit made its tortuous way through several rounds of pretrial
    > | motions until last fall, when US District Judge Carolyn Dimmick denied
    > | Microsoft’s final plea for summary judgment, finding credible evidence that
    > | Microsoft may have violated SEC rules, as Pancerzewski alleged. Shortly
    > | thereafter, Microsoft and Pancerzewski settled out of court. Terms of the
    > | agreement were sealed, but one source who claims familiarity with the case
    > | says that Microsoft paid Pancerzewski $4 million.

    Typical Microsoft tactic. Try to get a preliminary judgement, and if
    the judge gives
    you a clearly unfavorable ruling suggests further investigation, they
    bury the case
    by offering a settlement, having the records sealed, and barring the
    other party from
    testifying against Microsoft.

    > http://web.archive.org/web/20070308032343rn_2/www.seattleweekly.com/1

    > Why was this article removed last year? Why was the man paid 4 million to keep
    > is mouth shut? This is hugely damaging! It’s a smoking gun.

    > Another thing to point to when people ask: “why is Microsoft a criminal
    > organisation?”
    >
    > Recent:

    > Ex-Microsoft Manager Sentenced for Fraud
    > http://www.hardocp.com/news.html?news=MzM3NjYsLCxoZW50aHVzaWFzdCwsLDE=
    >
    > Ex-Microsoft Manager Pleads Guilty, Sentenced For Embezzlement
    > http://www.crn.com/software/209400603

    Notice how quickly the federal prosecutors went after the ex manager
    who was defrauding Microsoft. In the plea-bargain, she got 22 months,
    and just under $1 million in settlements.
    The 22 months may have helped her get into “club fed” and the actual
    amount might have been $1 million minus her own legal fees.

    > Ex-Microsoft manager ordered to prison
    > http://www.upi.com/Business_News/2008/07/19/Ex-Microsoft_manager_orde
    >
    > Ex-Microsoft manager jailed for $1m fraud
    > http://www.vnunet.com/vnunet/news/2222135/microsoft-manager-jailed-1m
    >
    > Ex-Microsoft Manager Gets 22 Months for Fraud
    > http://www.pcworld.com/businesscenter/article/148642/exmicrosoft_mana
    >
    > Ex-Microsoft boss sentenced
    > http://seattlepi.nwsource.com/business/371393_msftcourt19.html
    >
    > Former Microsoft Manager Gets 2 Years In Jail
    > http://news.portalit.net/fullnews_former-microsoft-manager-gets-2-yea

    > Kirkland woman senteced to 22 months, ordered to repay nearly $1 million, for
    > embezzlement scheme
    > http://www.pnwlocalnews.com/news/25634819.html

    Wow, mess with Microsoft and your punishment will make LOTS of papers
    - message, don’t mess with Microsoft, they will mess you up.

DecorWhat Else is New


  1. Links 30/01/2023: Coreboot 4.19 and Budgie 10.7

    Links for the day



  2. IRC Proceedings: Sunday, January 29, 2023

    IRC logs for Sunday, January 29, 2023



  3. [Meme] With Superheroes Like These...

    Ever since the new managers arrived the talent has fled the company that falsely credits itself with "Open Source"



  4. Not Tolerating Proprietary 'Bossware' in the Workplace (or at Home in Case of Work-From-Home)

    The company known as Sirius ‘Open Source’ generally rejected… Open Source. Today’s focus was the migration to Slack.



  5. The ISO Delusion: A Stack of Proprietary Junk (Slack) Failing Miserably

    When the company where I worked for nearly 12 years spoke of pragmatism it was merely making excuses to adopt proprietary software at the expense of already-working and functional Free software



  6. Debian 11 on My Main Rig: So Far Mostly OK, But Missing Some Software From Debian 10

    Distributions of GNU/Linux keep urging us to move to the latest, but is the latest always the greatest? On Friday my Debian 10 drive died, so I started moving to Debian 11 on a new drive and here's what that did to my life.



  7. Stigmatising GNU/Linux for Not Withstanding Hardware Failures

    Nowadays "the news" is polluted with a lot of GNU/Linux-hostile nonsense; like with patents, the signal-to-noise ratio is appalling and here we deal with a poor 'report' about "Linux servers" failing to work



  8. Microsofters Inside Sirius 'Open Source'

    Sirius ‘Open Source’ has been employing incompetent managers for years — a sentiment shared among colleagues by the way; today we examine some glaring examples with redacted communications to prove it



  9. Links 29/01/2023: GNOME 43.3 Fixes and Lots About Games

    Links for the day



  10. The Hey Hype Machine

    "Hey Hype" or "Hey Hi" (AI) has been dominating the press lately and a lot of that seems to boil down to paid-for marketing; we need to understand what's truly going on and not be distracted by the substance-less hype



  11. IRC Proceedings: Saturday, January 28, 2023

    IRC logs for Saturday, January 28, 2023



  12. Unmasking AI

    A guest article by Andy Farnell



  13. The ISO Delusion/Sirius Corporation: A 'Tech' Company Run by Non-Technical People

    Sirius ‘Open Source’ was hiring people who brought to the company a culture of redundant tasks and unwanted, even hostile technology; today we continue to tell the story of a company run by the CEO whose friends and acquaintances did severe damage



  14. Links 28/01/2023: Lots of Catching Up (Had Hardware Crash)

    Links for the day



  15. IRC Proceedings: Friday, January 27, 2023

    IRC logs for Friday, January 27, 2023



  16. Microsoft DuckDuckGo Falls to Lowest Share in 2 Years After Being Widely Exposed as Microsoft Proxy, Fake 'Privacy'

    DuckDuckGo, according to this latest data from Statcounter, fell from about 0.71% to just 0.58%; all the gains have been lost amid scandals, such as widespread realisation that DuckDuckGo is a Microsoft informant, curated by Microsoft and hosted by Microsoft (Bing is meanwhile laying off many people, but the media isn’t covering that or barely bothers)



  17. This is What the Microsoft-Sponsored Media Has Been Hyping Up for Weeks (Ahead of Microsoft Layoffs)

    Reprinted with permission from Ryan



  18. [Meme] António Campinos Wants to Be F***ing President Until 2028

    António Campinos insists he will be EPO President for 10 years, i.e. even longer than Benoît Battistelli (despite having appalling approval rates from staff)



  19. European Patent Office Staff Losing Hope

    The EPO’s management with its shallow campaign of obfuscation (pretending to protect children or some other nonsense) is not fooling patent examiners, who have grown tired and whose representatives say “the administration shows no intention of involving the staff representation in the drafting of the consultant’s mandate” (like in Sirius ‘Open Source’ where technical staff is ignored completely for misguided proposals to pass in the dark)



  20. IRC Proceedings: Thursday, January 26, 2023

    IRC logs for Thursday, January 26, 2023



  21. Sirius Relegated/Demoted/Destined Itself to Technical Hell by Refusing to Listen to the Technical Staff (Which Wanted to Stay With Asterisk/Free Software)

    In my final year at Sirius ‘Open Source’ communication systems had already become chaotic; there were too many dysfunctional tools, a lack of instructions, a lack of coordination and the proposed ‘solution’ (this past October) was just more complexity and red tape



  22. Geminispace Approaching Another Growth Milestone (2,300 Active Capsules)

    The expansion of Geminispace is worth noting again because another milestone is approached, flirted with, or will be surpassed this coming weekend



  23. [Meme] Cannot Get a Phone to Work... in 2022

    Sirius ‘Open Source’ wasted hours of workers’ time just testing the phone after it had moved to a defective system of Google (proprietary); instead of a rollback (back to Asterisk) the company doubled down on the faulty system and the phones still didn’t work properly, resulting in missing calls and angst (the company just blamed the workers who all along rejected this new system)



  24. [Meme] Modern Phones

    Sirius ‘Open Source’ is mistaking “modern” for better; insecurity and a lack of tech savvy typically leads to that



  25. The ISO Delusion: Sirius Corporation Demonstrates a Lack of Understanding of Security and Privacy

    Sirius ‘Open Source’, emboldened by ISO ‘paperwork’ (certification), lost sight of what it truly takes to run a business securely, mistaking worthless gadgets for “advancement” while compelling staff to sign a new contract in a hurry (prior contract-signing scandals notwithstanding)



  26. Links 26/01/2023: LibreOffice 7.4.5 and Ubuntu Pro Offers

    Links for the day



  27. Links 26/01/2023: GNU poke 3.0 and PipeWire 0.3.65

    Links for the day



  28. IRC Proceedings: Wednesday, January 25, 2023

    IRC logs for Wednesday, January 25, 2023



  29. Companies Would Collapse Upon Abandoning Their Original Goals (That Attracted All the Productive Staff)

    Staff with technical skills won't stick around in companies that reject technical arguments and moreover move to proprietary software in a company that brands itself "Open Source"



  30. [Meme] Listen to Your Workers, Avert Disaster

    Companies that refuse to take input from staff are doomed to fail


RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

Recent Posts