The Securities and Exchange Commission announced on Thursday that it has charged former Microsoft senior portfolio manager Brian Jorgenson and his friend/business partner Sean Stokke with insider trading ahead of company announcements.
They are also criminally charged by the U.S. Department of Justice.
According to the SEC, Jorgenson obtained confidential information about upcoming company news through his work in Microsoft's corporate finance and investments division. He then relayed the news to his friend and co-worker Stokke in advance of the announcements, the most recent in October. Stokke then traded his shares, and split the "illicit" profits with Jorgenson in their shared brokerage accounts. With the extra money at hand, the two made joint trading decisions with the goal of making enough money to create a hedge fund.
The trading actually first started before Microsoft announced its deal with Barnes & Noble's e-reader business in April 2012. Jorgenson told Stokke what was about to happen, so Stokke purchased around $14,000 worth of call options on Barnes & Noble common stock. Once the $300 million deal between Microsoft and the book retailer was announced, the stock price jumped up to $20.75 per share, a 51.68 percent increase. Stokke sold those shares immediately and made a profit of $185,000.
In July 2013, another scheme brought in $195,000, and one in October 2013 that only brought in a mere $13,000. Ultimately, the two made a combined $393,000 in profits. Now each have 35 felony counts of insider trading.
"Jorgenson and Stokke are charged with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, both directly and pursuant to 20(d) of the Exchange Act," the SEC reports. "The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and financial penalties against Jorgenson and Stokke as well as an officer-and-director bar against Jorgenson."
Microsoft reportedly fired Jorgenson when the company heard about the insider trading. The company also helped the government with its investigation. A spokesperson told The Seattle Times that Microsoft has "zero tolerance" when it comes to insider trading.
"I am sorry," Jorgenson said. "It was just greed. I was focusing too much on the material things. This is an aberration of who I am."