SEC Charges Siebel Again on Improper Disclosure

 
 
By Dennis Callaghan  |  Posted 2004-06-30 Print this article Print
 
 
 
 
 
 
 

Updated: The company says it plans to fight an action from the Securities and Exchange Commission for making positive comments about its business to investors and negative ones to the public.

Siebel Systems Inc. plans to fight the Securities and Exchange Commissions latest complaint against the company alleging that the customer relationship management software company has again violated Regulation FD disclosure rules. San Mateo, Calif.-based Siebel issued a statement late Tuesday night saying that an "extensive internal review" of the SECs allegations turned up no violation of Regulation FD and that the SEC has not provided any "credible evidence" to support its latest allegations.
"The Company believes it has meritorious defenses to the lawsuit and is prepared to pursue resolution of this matter through the normal course of civil litigation," the statement read.
The SEC on Tuesday announced that it was filing suit against Siebel, alleging Regulation FD violation, which relates to improper disclosure of material financial information. Siebel, the first public company to be charged with violating Regulation FD, was also charged with violating a cease-and-desist order relating to its first alleged Regulation FD violation in November 2002. The latest charges center around two private events that Ken Goldman, Siebels chief financial officer, attended April 30, 2003. The SEC charges that in both a "one-on-one" meeting with an institutional investor and an invitation-only dinner hosted by Morgan Stanley, Goldman made positive comments about Siebels business activity levels and transaction pipeline that materially contrasted with negative public statements the company made about its business in the preceding weeks. The next day, Siebels stock closed about 8 percent higher on nearly twice the average daily trading volume of the previous year. An unnamed institutional investor also converted its 108,200-share short position in Siebel stock into a 114,200-share long position—a net change of 222,400 shares. But the company had made no public disclosure of Goldmans comments that day, as it was required to under Regulation FD. Todays action also charges Siebel with violating Exchange Act Rule 13(a)-15, which requires public companies to maintain disclosure controls and procedures designed to ensure the proper handling of information that is required to be disclosed in reports filed or submitted under the Exchange Act, and to ensure that management has the information it needs to make timely disclosure decisions. Siebel is once again the first company to be charged with violating this rule. Click here to read about Tom Siebel stepping down as the companys CEO. In addition to the charges against the company, Goldman and former investor relations director Mark Hanson were charged with aiding and abetting Siebels violations of the commissions cease-and-desist order, Section 13(a) of the Securities Exchange Act of 1934 and Regulation FD by making an intentional or nonintentional selective disclosure of material, nonpublic information. Hanson, now senior vice president of corporate development at Siebel, is charged since he was responsible for making sure Siebel adhered to Regulation FD at the time. The SEC is seeking an order commanding Siebel to comply with its cease-and-desist order, permanent injunctions and civil penalties against all defendants, along with other "equitable relief" to ensure that Siebel adopts adequate Regulation FD compliance policies and practices and that it maintains adequate disclosure controls and procedures, according to the complaint. To read about a shareholder lawsuit the company is facing, click here. Siebel previously had to pay a $250,000 fine and submit to the cease-and-desist order without admitting or denying the SECs findings regarding its first alleged Regulation FD violation. Those charges stemmed from comments then-CEO Tom Siebel made at a private investors conference in November 2001. Regulation FD, which took effect in October 2000, was instituted to prevent public companies from disclosing material financial information to a select group before that information is made available to the public. Siebel officials did not respond to requests for further comment. Editors Note: This story was updated to include a statement from Siebel. Check out eWEEK.coms Enterprise Applications Center at http://enterpriseapps.eweek.com for the latest news, reviews and analysis about productivity and business solutions.

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