Oracle CEO Larry Ellison has settled a four-year insider trading lawsuit.
The settlement, which must first be approved by Oracle's board of directors, would end a lawsuit brought against Ellison in March 2001. It charged that Ellison engaged in insider trading by selling nearly $900 million in Oracle stock in January 2001, just weeks before the company announced that it would not meet earning expectations for its third fiscal quarter of 2001.
Ellison sold his stock for an average of $30.76 per share, before the stock plummeted to nearly half that value on news of the earnings miss, according to Joseph Tabacco, one of the lawyers who brought the suit to court. The day after the third-quarter results were announced, Oracle shares were trading at $16.98.
A court hearing on the settlement had been scheduled for 26 September in California, said Tabacco, a lawyer with Berman DeValerio Pease Tabacco Burt & Pucillo in San Francisco.
Ellison will donate $100 million over five years to various big charities as part of the settlement, Tabacco said.
This is not the first case that has been brought against Ellison over the $900 million in trades. Last year, a Delaware court found that he and Jeffrey Henley, formerly Oracle's chief financial officer, were not guilty of insider trading in the matter. And a securities class action lawsuit over the trades is still pending in federal court, Tabacco said.
Unlike the securities class action lawsuit, which was brought against Ellison on behalf of the shareholders, the derivative suit was brought on behalf of Oracle itself, Tabacco said. Accordingly, the settlement must be of benefit to Oracle, he said.
Tabacco could not say why the settlement did not simply involve a payment to Oracle, but he said that the software company would benefit from the agreement. "The most tangible benefit is the fact that they are being credited with a $100 million charitable deduction," he said.
Oracle declined to comment.