Oracle To Formally Investigate Insider Trading Allegations

The board's Special Litigation Committee (SLC) has interceded in lawsuits filed on behalf of shareholders in state courts in Wilmington, Del., and San Mateo County, Calif. The SLC includes Oracle directors Joseph Grundfest, former commissioner of the U.S. Securities and Exchange Commission, and Hector Garcia-Molina. Grundfest and Garcia-Molina are professors at Stanford University.

An Oracle spokeswoman said the company had no information on the status of the SLC's work. The committee, however, has informed the Delaware and California state courts that it expects to reach a conclusion by Nov. 1.

Meanwhile, the lawsuits have been delayed while lawyers for various parties argue whether jurisdiction should be in Delaware or California, and how quickly the SLC must turn over corporate documents to lawyers for the shareholders.

Neither Grundfest nor Garcia-Molina responded to requests for comment on the lawsuits or the committee's work.

The suits were filed after Ellison and the other executives sold Oracle shares last year for about $1 billion. Within several weeks,after Oracle informed Wall Street that it would have difficulty meeting its revenue and profit forecasts for the early part of 2001,the company's shares dropped by about 50 percent.

The suits charge that Ellison, Oracle CFO Jeffrey Henley and Oracle board member Michael Boskin sold the shares before the price dropped to about $15 per share, from more than $30. Ellison alone sold $894 million of his holdings early last year,the first time in five years he sold any stock in the company, according to the suit.

Ellison still owns almost 1.4 billion shares of Oracle stock, which would be worth about $11.7 billion, according to Oracle's most recent proxy statement.

Before the committee interceded, lawyers for the company and executives denied any wrongdoing, noting for example that Ellison had only sold a fraction of his holdings and personally lost billions in his net worth when Oracle shares tanked.

Legal papers also said that at the time the executives sold the shares, Oracle was having difficulty bringing its Oracle11i product to market and was having particular trouble with more than a dozen large accounts.

In addition, according to the shareholders who filed the litigation, Oracle executives maintained that the company's sales and finances were on track in late 2000 and early last year, even though the problems with Oracle11i were mounting and indications showed that sales were softening.

Oracle responded that company executives had no reason to believe that sales were soft, since large numbers of contracts actually close at the end of each quarter.

One solution provider executive, who requested anonymity and whose company is both a partner and competitor of Oracle, said that while serious technical issues with Oracle11i surfaced last year, the vendor has slowly resolved many of the software deployment issues.