[July 1, 2004]

SEC To Siebel: You�ve Been Bad�Again

BY TRACEY SCHELMETIC

Yesterday, the Securities and Exchange Commission charged Siebel Systems (news - alert - quote) with its second violation of regulations, including a November 2002 cease-and-desist order. Cited by name in the charges are Siebel�s CFO Kenneth Goldman and Mark Hanson, currently a company senior officer who formerly served as director of investor relations. Both Goldman and Hanson have been slapped with charges they �aided and abetted Siebel�s violations.�

The SEC also charged the Silicon Valley-based software behemoth with violating Exchange Act Rule 13a, which (for those of you who have yet to memorize the SEC regulations) 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 management has the information it needs to make timely disclosure decisions.

Did you follow that? It�s the way lawyers say �swept information under the rug.�

Regulation FD, the primary complaint, prevents issuers from �selectively disclosing nonpublic information to certain persons�-- securities analysts, broker-dealers, investment advisors and institutional investors -- before disclosing the same information to the public. Back in November of 2002, the SEC found that Siebel violated this regulation and issued a cease-and-desist order. Siebel pled �no contest� to those charges and settled, paying a $250,000 penalty.

The new charges allege that in April of 2003, Goldman and Hanson attended a one-on-one meeting with an institutional investor, as well as an invitation-only dinner with Morgan Stanley executives. At these events, Goldman allegedly made comments about Siebel�s positive business outlook, including business in the pipeline that contrasted with negative messages being offered to the general public. Acting upon this positive information, an institutional investor is alleged to have acted on the information, converting shares and reaping significantly positive gains. On the whole, the day after the meeting, trading volume in Siebel was double what it had been the same day in the previous year.

The SEC apparently got suspicious. It is, after all, their job.

Tracey Schelmetic is editorial director of Customer Inter@ction Solutions magazine. She may be contacted at [email protected].