Microsoft has been in the news for all the wrong reasons lately: unpopular products, an inability to find a new CEO, and now an insider trading scandal. But to be fair, the company can’t really be blamed for its latest PR headache.
The US Securities and Exchange Commission (SEC) today has charged a former Microsoft employee and his friend and business partner with insider trading. The regulator alleges that Brian D. Jorgenson, a Washington state resident who worked in Microsoft’s corporate finance department, has been tipping off his friend, Sean T. Stokke, about company changes ahead of their announcements. According to the allegations, Stokke would trade on the inside information Jorgenson provided, and the two men would split the profits, which the SEC claims add up to $393,125 in their joint brokerage accounts.
It all started in April 2012, when Jorgenson allegedly tipped off Stokke about Microsoft’s plans to invest $300 million in Barnes & Noble’s e-reader business. In that deal, Microsoft took an 18% stake in the bookseller’s Nook unit. On the day of that announcement, Barnes & Noble’s stock jumped 52%. Since then, sales of the e-reader have plummeted, and analysts don’t think Microsoft is anywhere close to generating a return on its investment.
This is the first insider trading case in a while that hasn’t involved the hedge fund industry. But in a way, the case still touches the industry, since the goal of the alleged perpetrators was to make “joint trading decisions with the goal of generating enough profits to create their own hedge fund,” the SEC said.