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SEC Charges Siebel With Violating Fair Disclosure Rule--Again

Jun 29, 2004 (01:06 PM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=22102837


WASHINGTON (AP) -- Federal regulators charged Siebel Systems Inc. on Tuesday with violating a rule barring companies from revealing information to Wall Street before the general public--the second such accusation against the software maker.

The Securities and Exchange Commission also said in a civil lawsuit that two top executives of Siebel, Kenneth Goldman and Mark Hanson, aided and abetted the company's alleged violations.

The agency is seeking unspecified civil fines and permanent injunctions against Siebel; Goldman, who is the company's chief financial officer; and Hanson, Siebel's former director of investor relations, who now has another position at the company.

Spokesmen for Siebel, based in San Mateo, Calif., had no immediate comment.

It was a rare SEC action under a 4-year-old rule known as Regulation FD, or Fair Disclosure, which forbids companies from providing information to stock analysts and other Wall Street insiders ahead of the public.

Siebel agreed in November 2002 to pay a $250,000 civil fine to settle the SEC's allegation that statements in November 2001 by its chief executive at an investment banking conference violated Regulation FD. The company neither admitted to nor denied wrongdoing in that settlement, but it did agree to refrain from future such violations.

In the new suit, the SEC alleged that on April 30, 2003, Goldman disclosed significant confidential information during two private events he attended with Hanson in New York: a one-on-one meeting with an institutional investor and an invitation-only dinner hosted by big investment firm Morgan Stanley. On those occasions, the SEC said, Goldman made "positive comments" about the business software maker's activities that contrasted sharply with negative public statements the company had made several weeks before.

The next day, May 1, Siebel's shares closed some 8 percent above the previous day's price in unusually heavy trading, the SEC noted.

The SEC suit also, for the first time, invokes a law requiring companies to properly control and handle information they must disclose in financial reports, saying that Siebel had violated it.

Once a Wall Street darling, Siebel has faced fierce criticism from shareholders angered about a downfall that at one point had erased nearly $50 billion in shareholder wealth.

When it reached the settlement with Siebel in November 2002, the SEC also announced accords with Raytheon Co. and Secure Computing Corp. in the first cases involving alleged violations of Regulation FD. Unlike Siebel, Raytheon and Secure Computing were not fined.

Last September, pharmaceutical giant Schering-Plough Corp. agreed to pay a $1 million civil fine to settle similar allegations by the SEC.

In all the settlements, the companies neither admitted to nor denied wrongdoing.