Feeds

Whistleblower settles after Microsoft SEC fraud claim

A former senior staffer has settled out of court, possibly for $4m - but the SEC may still be interested

  • alert
  • submit to reddit

The essential guide to IT transformation

A senior whistleblower who had accused Microsoft of systematically distorting its figures has settled out of court with the company, leaving hanging the question of whether or not the US Securities and Exchange Commission is investigating his claims. According to a story published in the Seattle Weekly earlier this week, Charlie Pancerzewski had been claiming unfair dismissal under the US Whistleblowers Protection Act. He claimed to have been forced to resign in 1995 after reporting his suspicions about Microsoft bookkeeping to CFO Mike Brown and COO Bob Herbold. Pancerzewski had been head-hunted for the post of chief of internal audits by Bob Herbold, then CFO, in 1991, having previously been a partner at Deloitte, Haskins & Sells ( now Deloitte Touche). His performance evaluations until 1995 were excellent, but shortly after reporting his suspicions he was given a snap, unfavourable evaluation, and shortly afterwards given the option of resignation or dismissal. The Whistleblowers Protection Act applies in cases such as this in the US. Pancerzewski claimed that he'd identified possible breaches of SEC rules, but that when he'd told his superiors, he'd been elbowed out. He filed under the Act in 1997, and after several months of pretrial motions the judge denied Microsoft's motion for summary judgement on the grounds that she found that there was evidence that Pancerzewski's allegations could be true, and that Microsoft had indeed violated SEC rules. This process will be familiar to Microsoft trial watchers. Motions for summary dismissal are commonplace, and depend on it being shown that there is no case to answer. If there is evidence that's worth considering, then the judge will throw out the motion, as happened here. But then in November Microsoft and Pancerzewski settled out of court. It was a civil action, so this is perfectly normal, but as the terms of the deal are secret, neither Pancerzewski nor Microsoft will talk about it. The Seattle Weekly claims sources say he got $4 million. But court records of the case show Pancerzewski had claimed he'd been ordered to destroy a consultant's report about potential tax liabilities in Europe, and that he'd found that Microsoft was controlling the level of reported income by switching money back and forth from reserves. Much simplified, this procedure involves putting money into reserves in good times, and transferring it back into reported income when times are hard. It's used to keep earnings apparently growing smoothly, and it is illegal, under SEC rules. The judge threw out some of his allegations for lack of evidence, but retained this one. Microsoft itself claims that its actions were legal, and his departure entirely unrelated to his claims. But if the judge found evidence of smoke, nostrils at the SEC will surely be twitching. Register factoid: To our recollection, for several years now Microsoft's high command has habitually predicted tougher times ahead, and then Microsoft has habitually outperformed the (Microsoft-briefed) analysts' predictions when its results have been filed. ®

Boost IT visibility and business value

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Fast And Furious 6 cammer thrown in slammer for nearly three years
Man jailed for dodgy cinema recording of Hollywood movie
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Scale data protection with your virtual environment
To scale at the rate of virtualization growth, data protection solutions need to adopt new capabilities and simplify current features.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?