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December 19, 2013 at 11:17 AM
The Securities and Exchange Commission on Thursday charged a senior portfolio manager at Microsoft Corp. and his friend and business partner with insider trading ahead of company announcements involving Barnes and Noble’s e-reader business and Microsoft’s fourth-quarter earnings announcement.
The SEC alleges that Brian D. Jorgenson, who lives in Lynwood, Wash., obtained confidential information about upcoming company news through his work in Microsoft’s corporate finance and investments division.
Jorgenson tipped Sean T. Stokke of Seattle in advance of the Microsoft announcements, the most recent occurring in October. After Stokke traded on the inside information that Jorgenson provided, the two equally split the illicit profits in their shared brokerage accounts. The two “made joint trading decisions with the goal of generating enough profits to create their own hedge fund,” the SEC said.
In a parallel action, the U.S. Attorney’s Office for the Western District of Washington announced the same day criminal charges against Jorgenson and Stokke.
“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,” said Daniel Hawke, chief of the SEC Enforcement Division’s Market Abuse Unit and director of the SEC’s Philadelphia Regional Office, in a statement. “We thwarted the misguided plans of Jorgenson and Stokke as they sought to illegally profit at others’ expense.”
According to the SEC’s complaint filed in U.S. District Court for the Western District of Washington, Jorgenson and Stokke made a combined $393,125 in illicit profits in their scheme, which began in April 2012.
The SEC alleges that Stokke first traded in advance of a public announcement that Microsoft intended to invest $300 million in Barnes & Noble’s Nook e-reader. “Jorgenson learned of the impending transaction after his department became involved in the financing aspects of the deal. Jorgenson tipped Stokke so he could purchase approximately $14,000 worth of call options on Barnes & Noble common stock,” the SEC says. “Following a joint public announcement on April 30, Barnes & Noble’s stock price closed at $20.75 per share, a 51.68% increase from the previous day. Jorgenson and Stokke made nearly $185,000 in ill-gotten trading profits.”
