"A senior employee at Microsoft MSFT -0.97% Corporation and an acquaintance face criminal and civil charges that they made nearly $400,000 in illicit profits by trading on confidential Microsoft information, including earnings announcements and strategic investment decisions. The U.S. Attorney’s Office for the Western District of Washington and the Securities and Exchange Commission unveiled criminal and civil enforcement actions against Brian D. Jorgenson, a senior portfolio manager at Microsoft, and his friend, Sean T. Stokke, alleging they sought to use their illicit profits to create their own hedge fund.
According to the Commission, Jorgenson tipped off Stokke to several upcoming announcements, including Microsoft’s decision to invest $300 million in Barnes & Noble's NE -0.03% Nook e-reader business, as well as Microsoft’s quarterly earnings announcements in July 2013 and October 2013. Jorgenson was privy to this information as part of his job duties at Microsoft, which included the preparation of a written analysis predicting the market’s reaction in July 2013 to Microsoft’s announcement that earnings would fall below analyst consensus.
After learning of the decision to invest in Barnes & Noble, Stokke allegedly bought $14,000 worth of Barnes & Noble call options. The options, which allow the holder to speculate on the short-term price action of a stock, skyrocketed in value after the announcement caused Barnes & Noble stock to post a nearly-52% increase. The pair netted nearly $185,000 in ill-gotten trading gains from the trade. Additionally, after learning Microsoft’s quarterly earnings ahead of the general public in July 2013 and October 2013, the pair made lucrative options trades that resulted in a total of more than $200,000 in trading profits. Interestingly, perhaps in an effort to throw regulators off the scent of the October 2013 trades, Stokke purchased call options on an exchange-traded fund in which Microsoft comprised a majority posit