Oracle Shareholder Lawsuit Reinstated

Citing what it termed suspicious insider stock sales, public boasting by executives and overly rosy financial forecasts, a federal appeals court Wednesday reinstated a class-action lawsuit filed by shareholders against Oracle Corp. and top executives.

The U.S. 9th Circuit Court of Appeals said Chief Executive Larry Ellison’s sale of nearly $900 million of stock a month before the company announced disappointing financial results was suspicious.

In addition, the three-judge panel cited Ellison’s public boasts in 2000 that the business software maker was impervious to a slumping economy, as well as subsequent rosy sales forecasts that failed to pan out in early 2001, in ruling that the shareholder suit should continue.

Deborah Lilienthal, a spokeswoman for Redwood City, Calif.-based Oracle, said in a statement, “We believe that the allegations in that complaint are wholly unsupported by any evidence, and we are confident that Oracle will prevail when the litigation is concluded.”

A lower-court judge had earlier tossed out the complaint, saying the shareholders had not proved that Ellison and other Oracle executives had knowingly violated securities laws and lied about the company’s financial situation between Dec. 15, 2000, and March 1, 2001.

The appeals court said Wednesday that there was a chance company executives knew they were lying when they made optimistic comments, especially given the company’s advanced internal software, and that the shareholders should have their day in court.

“All of our information is on one database,” the court quotes Ellison as publicly stating during the time covered by the lawsuit. “We know exactly how much we have sold in the last hour around the world.”

The company’s shares fell from $28.56 on Dec. 15, 2000, to $16.88 on March 2, 2001. On March 1, 2001, the company announced that its quarterly earnings had missed projections and reported that its sales forecasts were off significantly.

A month earlier, Ellison had made his first sales of Oracle stock in five years.

“The timing of the stock sale is also suspicious,” the court said.

Between Jan. 22 and Jan. 31, 2001, Ellison sold 29 million shares of Oracle stock -- about 2% of his total stake -- for nearly $900 million. He acquired the stock for 23 cents a share and sold it for $30 to $32 a share.

This year Ellison announced that he intended to sell as many as 120 million shares of Oracle stock in 2004 and give 3.3 million shares to the Ellison Medical Foundation. Ellison still owns more than 1.2 billion Oracle shares.

Oracle shares rose 8 cents to $10.05 on Wednesday on Nasdaq.