November 30, 2004 8:44 AM PST

Judge dismisses Oracle insider-trading suit

Oracle chief Larry Ellison's Thanksgiving holiday was likely more restful than expected.

The Delaware Chancery Court judge who is hearing the PeopleSoft case issued a summary judgment just before the four-day weekend that the Oracle CEO, as well as its chairman, did not engage in insider trading in 2001.

Vice Chancellor Leo Strine ruled Wednesday that the evidence presented did not indicate that either Ellison or Oracle Chairman Jeff Henley practiced insider trading that year, prior to Oracle's stock taking a hit over missed earnings.

For Ellison and Henley, the good news comes as Strine is also weighing the significant matter of lifting the poison pill in Oracle's $9.2 billion hostile takeover bid for PeopleSoft.

Because the two suits are not related, legal experts say it's difficult to draw any conclusions about whether Strine will ultimately rule in Oracle's favor in the anti-takeover, or poison pill, case. Nonetheless, Ellison and Henley can at least chalk up one victory in Strine's courtroom.

In the insider-trading case, Oracle shareholders alleged that Henley--who, at the time, served as chief financial officer--as well as Ellison, and independent directors Don Lucas and Michael Boskin, sold company stock in the weeks leading up to the company's quarterly earnings results, which missed Wall Street's expectations. The stock sales began in early January of 2001.

The following year, in 2002, Oracle established an independent committee to determine whether the company should settle the insider-trading lawsuits.

Strine found that the committee was packed with members who had either close financial or personal ties with the company.

Ultimately, however, Strine found that the timing of the stock sales was a coincidence, given that software companies typically make a large portion of their sales in the final weeks of a quarter and fiscal year.

"It is not rationally disputable that Oracle's quarterly performance was predominantly determined by its third-month performance and that the third month was itself heavily dependent on performance within the last week of the quarter," Strine stated in his ruling, which was released publicly Monday.

"For this reason," he wrote, "there is no rational way to infer from the record that anyone involved at high levels, in examining Oracle's ability to make its quarterly estimates, placed substantial weight on the first-month performance within quarters."

 

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