Oracle Corp. chief executive Lawrence J. Ellison tentatively agreed to pay $100 million to charity over five years to settle a private lawsuit in California accusing him of insider trading in Oracle stock, a plaintiff's lawyer in the case said yesterday.
Plaintiffs in the suit alleged that Ellison engaged in insider trading when he sold nearly $900 million worth of Oracle shares in January 2001, a little more than a month before the company announced poor earnings. Oracle shares fell 21 percent, to $16.88, after the announcement. Ellison had sold his stock for a little less than twice that amount.
The proposed settlement, reported yesterday by the New York Times and the San Jose Mercury News, must be approved by Oracle's board and a California judge. If approved, the deal would end what is known as a shareholder derivative lawsuit, an increasingly common type of civil case in which shareholders file suit on behalf of a company.
Monetary settlements in derivative cases have typically been small, and most of the money usually goes to plaintiff's attorneys. Companies often agree to make changes to the way they operate in order to settle the suits.
Joseph J. Tabacco Jr., an attorney for plaintiffs in the case, said the charity payments represent a compromise between the two sides. He said Oracle shareholders would benefit because the company will implement new insider-trading rules as part of the settlement.
A Delaware judge last year dismissed a similar derivative case against Ellison. A class-action suit stemming in part from the stock sales is pending in federal court. A trial judge dismissed the federal case, but an appeals court reinstated it.
Tabacco said Ellison may have chosen to settle the California derivative suit because the legal bar for proving insider trading appears to be lower in California than in Delaware. California law also provides for damages of up to three times the difference between the price at which someone buys or sells a stock and what the price would have been had the inside information been public. That left Ellison open to a potential judgment of $1.2 billion.
Tabacco said that as part of the deal, Oracle would pay $22.5 million to plaintiff's lawyers. An Oracle spokeswoman declined to comment. Forbes magazine last year estimated Ellison's worth at $13.7 billion. He owns about 1.3 billion Oracle shares, or 24.5 percent of the company's stock, according to a recent filing.