U.S. Securities and Exchange Commission
Litigation Release No. 18766 / June 29, 2004
Securities and Exchange Commission v. Siebel Systems, Inc., Kenneth A. Goldman and Mark D. Hanson, Civil Action No. 04-CV-5130 (GBD) (S.D.N.Y.)
SEC CHARGES SIEBEL SYSTEMS, INC. WITH SECOND VIOLATION OF REGULATION FD; SIEBEL'S CFO AND FORMER INVESTOR RELATIONS DIRECTOR CHARGED WITH AIDING AND ABETTING VIOLATIONS
SEC ALSO CHARGES SIEBEL WITH FAILING TO MAINTAIN ADEQUATE DISCLOSURE CONTROLS AND PROCEDURES
The Securities and Exchange Commission today filed a civil action against Siebel Systems, Inc., charging that Siebel violated Regulation FD and a Commission cease-and-desist order. Two senior Siebel executives, Kenneth A. Goldman, the company's chief financial officer, and Mark D. Hanson, a current senior officer and the company's former Investor Relations Director, are charged with aiding and abetting Siebel's violations.
The Commission also charged Siebel with violating Exchange Act Rule 13a-15, which requires issuers 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. This is the first Commission case charging a violation of this rule.
Regulation FD prohibits issuers from selectively disclosing material nonpublic information to certain persons-securities analysts, broker-dealers, investment advisers and institutional investors-before disclosing the same information to the public. In November 2002, the Commission issued an order finding that Siebel violated Regulation FD and requiring Siebel to cease and desist from committing or causing any future violations. Siebel settled that matter without admitting or denying the Commission's findings. As part of the settlement, Siebel also agreed to pay a $250,000 civil penalty. See Lit. Rel. No. 17860 / November 25, 2002.
The Commission's Complaint alleges that, six months after the cease-and-desist order was issued, Goldman disclosed material nonpublic information during two private events he attended with Hanson in New York on April 30, 2003, a "one-on-one" meeting with an institutional investor and an invitation-only dinner hosted by Morgan Stanley. The Commission charges that, at both the meeting and the dinner, Goldman made positive comments about the Company's business activity levels and transaction pipeline that materially contrasted with negative public statements Siebel made about its business in the preceding several weeks. According to the Complaint, based on Goldman's comments in the April 30 meeting, an institutional investor converted its 108,200 share short position in Siebel stock into a 114,200 share long position-a net change of 222,400 shares. On May 1, 2003, the day following the private meetings, the company's stock price closed approximately 8% higher than the prior day's close, and the trading volume was nearly twice the average daily volume for the preceding year.
The Commission alleges that Hanson, who had been put in charge of Siebel's Regulation FD compliance, failed to prevent the selective disclosures, and that both Hanson and Goldman failed to cause Siebel to make a public disclosure the next day. Finally, the Complaint alleges that Siebel failed 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.
The Commission's Complaint charges Siebel with violating, and Goldman and Hanson with aiding and abetting Siebel's violations of, the Commission's cease-and-desist order, Section 13(a) of the Securities Exchange Act of 1934 and Regulation FD thereunder by making an intentional selective disclosure of material nonpublic information or, alternatively, a non-intentional selective disclosure. The Commission's Complaint also charges Siebel with violating Section 13(a) and Rule 13a-15 thereunder for its failure to maintain adequate disclosure controls and procedures. The Commission is seeking an order commanding Siebel to comply with the Commission's cease-and-desist order, permanent injunctions and civil penalties against all defendants, and other equitable relief to ensure that Siebel adopts adequate Regulation FD compliance policies and practices and that it maintains adequate disclosure controls and procedures.