Ex-Microsoft Manager, Friend Charged with Insider Trading

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Former Microsoft manager charged with insider trading
Andrew Harrer/Bloomberg via Getty Images
By Bill Rigby

SEATTLE -- The U.S. Department of Justice and the Securities and Exchange Commission charged two Seattle men Thursday with 35 counts of illegally trading on private Microsoft information, which prosecutors said netted the pair more than $390,000 in illicit profits over an 18-month period.

Brian Jorgenson, a senior portfolio manager at Microsoft (MSFT), passed information to a former colleague, online day trader Sean Stokke, who executed the trades, according to prosecutors.

According to complaints filed by the department and the SEC, the scheme began in April 2012 when Jorgenson, 32, found out through his job in Microsoft's treasury department that the software company was planning a multimillion dollar investment in the digital business of bookseller Barnes & Noble (BKS).

He passed that information to Stokke, now 28, who bought options betting that Barnes & Noble stock would rise. It jumped about 50 percent when the investment was announced in late April, reaping Stokke profit of more than $184,000, prosecutors said.

Stokke, who had previously worked with Jorgenson at an asset management company, %VIRTUAL-article-sponsoredlinks%then shared his profits with him via envelopes stuffed with $10,000 in cash, according to the charges, which resulted from probes by the Federal Bureau of Investigation and the SEC.

The pair repeated a similar process twice more in the following 18 months, prosecutors said, by buying options on Microsoft stock or an exchange-traded fund prior to earnings that Jorgenson knew would surprise Wall Street.

Together, the two men took in another $208,000 in profit from the trades, according to the SEC complaint, which indicated they planned to start their own hedge fund.

The Justice Department's insider trading charges are criminal and could result in up to 20 years in prison and $5 million in fines for both men. The SEC's charges are civil and call for financial penalties and the return of illegally gained profit.

"Abusing access to Microsoft's confidential information and generating unlawful trading profits is not a wise or legal business model for starting a hedge fund," said Daniel Hawke, chief of the SEC Enforcement Division's Market Abuse Unit.

Microsoft said it had already fired Jorgenson.

"Our company has zero tolerance for insider trading. We helped the government with its investigation and terminated the employee," a Microsoft representative said in an emailed statement. Barnes & Noble had no comment.

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Ex-Microsoft Manager, Friend Charged with Insider Trading
For years, security professionals have emphasized the importance of shredding your personal documents before you throw them out. But Holland notes that shredding isn't as much of a priority as it used to be. "There aren't nearly as many documents with personal information out there as there were even just two years ago," he explains. "These days, it's much easier to get your information off your computer."

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One piece of advice that you don't often hear is to keep on top of software updates. But, Holland argues, updating your operating system, your software, and your security programs is one of the easiest and most important ways to ensure your security. Software companies spend a lot of time and money trying to stay ahead of online intruders -- it only makes sense to take advantage of their work.
Even if you are convinced that your security is state-of-the-art and your password is unbreakable, it never hurts to double-check your most sensitive accounts. Holland suggests regularly checking your bank and credit card statements to ensure that there aren't any inappropriate charges on your accounts. As a side benefit, this is also a great way to catch any unexpected fees that your bank may try to spring on you.
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