According to Bloomberg, in a ruling that has important implications for Larry Ellison, Oracle's CEO and the company itself, district judge Susan Illston found that Ellison:
...deliberately destroyed or withheld e-mails and failed to preserve tape recordings that should have been turned over to lawyers for shareholders suing him...
Ellison and Oracle knew the material was potentially relevant to claims that they made false statements about the company's 2001 second-quarter financial results and problems with a software product, Illston said.
As a penalty, Illston said the jury in the case will be instructed to assume that Ellison knew about the problems. The judge also said she would take that assumption into account when deciding whether to rule in favor of investors on their claims for damages and Oracle's requests to throw the case out.
The case is a class action brought by Nursing Home Pension Fund. It claims Ellison improperly used his insider knowledge to cash in $900 million of stock before the company issued statements that discussed the problems. The software in question is the 11i Suite. The judgment, via the Wall Street Journal is here.
This is not the first time Ellison has been in trouble over insider dealings. In September 2005, he agreed to fork over $100 million to charities and cough up $22.5 million in legal fees on behalf of Oracle in order to settle another class action. The earlier case focused on Oracle's Q3 earnings, announced March, 2001.
Ellison is well known for taking an aggressive stance in his ongoing battle for a larger share of the enterprise pie. Part of those ongoing tactics include taking potshots at SAP during earnings calls. In the past, Oracle has made all manner of claims about customer wins that my Irregular colleagues could not make stack up. Let's not forget the Microsoft dustbin saga which surfaced back in 2000. At the time, Ellison was quoted as saying: "I'm prepared to ship our garbage to Redmond, and they can go through it."
Oracle may be no saint but it's not the only company that employs dirty tricks. Most recently, we have Oracle's case against SAP over TomorrowNow. Assuming this doesn't get settled prior to trial, it promises to yield all sorts of fascinating details about how the now defunct TomorrowNow plied its trade. Assuming Oracle is successful in claiming its $1 billion in damages, that could just as easily fly out the window if the Nursing Home Pension Fund is successful. However, given Judge Illston's ruling, a dark shadow has been cast across Oracle's credibility and that of its flamboyant leader.
Not that Ellison will be over worried. He recently managed to persuade the company to award him a 38% pay hike bringing his total package to something around $72 million. As one wag suggested in a direct Tweet message to me, "I guess an increasing part of his package will now go to his lawyers." Explain that at the open microphone session at the upcoming Oracle OpenWorld Mr. Ellison. -:)