Court clears way for Oracle fraud trial

A US appeals court has reinstated a fraud case that alleges software giant Oracle issued false sales projections so that its chief executive Larry Ellison could dump about $1bn (£560m) of shares before the price slumped.

Ellison, who at one time challenged Microsoft's Bill Gates as the world's richest man, sold more than 29m Oracle shares at $30 to $32 a share in January 2001.

He had obtained most of them as options for 23 cents each. Two months later Oracle's stock tumbled to $16.88 a share, a loss of nearly 50% in a month, after sales and profit forecasts were revised downwards.

Prosecutors allege that in the previous December, Oracle predicted strong financial results, knowing that to be false, so as to give Ellison and other executives time to dump their shares before the true picture became clear.

A judge originally dismissed the suit in March last year, saying the allegations, even if proven, lacked specific information that showed Ellison and other Oracle executives knew the forecasts were false. But the US Circuit Court of Appeals disagreed and in a 3-0 vote reinstated the suit.

According to a San Francisco Chronicle report, the court cited allegations that Oracle's internal database allowed its executives to monitor sales so closely that, as Ellison put it, the company knows how much it has sold around the world in the previous hour - evidence that would support a claim that the company knew its third-quarter projections were false.

The amount and timing of the executives' stock sales have also raised eyebrows. The sell-off was allegedly Ellison's first sale of Oracle stock in five years and 'cast suspicion on the stock trades and support a strong inference' of knowledge that the projections had been overstated, according to the court.

It also cited Ellison's public boasts in 2000 that the company was impervious to a slumping economy, and over-optimistic sales forecasts in early 2001. The company issued a statement saying that Ellison and the company had done nothing wrong.

'We believe that the allegations...are wholly unsupported by any evidence, and we are confident that Oracle will prevail,' it said.