US authorities filed criminal and civil charges on Thursday against a former Microsoft manager, saying he fed inside information to a day trader who used it to clear US$393,000 in illicit transactions.
Brian Jorgenson, 32, was a senior manager in Microsoft Corp’s Treasury Group when he provided the information to his friend Sean Stokke, 28, according to documents filed in US District Court in Seattle. They are accused of trading on three corporate developments: two recent quarterly earnings reports and Microsoft’s investment in Barnes & Noble Inc last year.
The pair planned to use the proceeds to open their own biotech hedge fund, FBI agent Kathleen Moran wrote in the criminal complaint, which charges Jorgenson and Stokke with 35 counts of insider trading.
Both confessed when questioned, Moran wrote, adding that Stokke said he had given Jorgenson about US$50,000 in cash out of the proceeds, in US$10,000 increments, packed into envelopes.
The pair accumulated Barnes & Noble stock options in advance of Microsoft’s announcement that it was investing in the company’s digital book business, the FBI said. The announcement caused Barnes & Noble’s stock to jump by nearly half, and the pair made US$184,000.
They are also accused of trading on Microsoft’s failure to meet earnings expectations in the fourth quarter of fiscal year 2013 and Microsoft’s increased first-quarter profit in fiscal year 2014.
“For every stock market winner, there is a loser, and trading on confidential inside information is a cheater’s way of gaining at the expense of others,” Seattle US Attorney Jenny Durkan said in a news release. “This conduct hurts companies, hurts individuals and shakes faith in our financial markets.
Jorgenson, a married father of four from the north Seattle suburb of Lynnwood, joined Microsoft in January 2011. He expects to plead guilty in a deal with prosecutors, said his attorney, Angelo Calfo.
Microsoft said in a written statement that the company has no tolerance for insider trading.
“We helped the government with its investigation and terminated the employee,” the statement said.
The US Securities and Exchange Commission (SEC) filed related civil charges.
The agency is seeking unspecified penalties and restitution from Jorgenson and Stokke, and seeks to have Jorgenson barred against serving as an officer or director of any public company.
“Abusing access to Microsoft’s confidential information and generating unlawful trading profits is not a wise or legal business model for starting a hedge fund,” Daniel Hawke, head of the SEC enforcement division’s market abuse unit, said in a statement.