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In recently unsealed documents, a federal insider trading and shareholder fraud suit alleges that hundreds of e-mails and financial records, and even audio interviews with Oracle Corp. CEO Larry Ellison, vanished or were improperly withheld from plaintiffs. Lawyers for Oracle have strenuously denied the accusations, contained in thousands of pages of documents unsealed at the request of The National Law Journal. Now, a showdown over the plaintiffs’ request for default judgment as a sanction for alleged document destruction, as well as motions on both sides for summary judgment, looms in a Nov. 16 hearing in U.S. district court in San Francisco. Two earlier derivative suits, stemming from the same 2001 stock drop, focused on more limited claims that Ellison sold nearly $1 billion in stock based on his inside knowledge that Oracle’s first-quarter 2001 results would be dismal. The two cases achieved split results. A Delaware judge dismissed one case in 2004, but a California state case produced a $122 million settlement in 2006. Still, the federal securities class action refuses to die. The case, Local 144 Nursing Home Pension Fund v. Oracle Corp., No. C01-988MJJ, raises much broader claims than the earlier cases. The unsealed documents spell out in detail assertions that Oracle routinely overcharged customers during that period and, rather than refund the money, it allegedly used millions of dollars to offset bad debt accounts of other customers to boost its bottom line. In addition, shareholders claim that in 2000, as the dot-com bubble burst, company sales began to lag at a time when Oracle released Suite 11i, a database-management system. The system proved to be riddled with bugs and allegedly cost the company customers, and plenty of capital to repair. The dot-com debacle also caught up with Oracle, a large supplier of software to now-defunct startups. Also, there are allegations, which remain under seal, that British writer Matthew Symonds, who co-authored a book about Ellison called Softwar, allegedly lost or destroyed the audiotaped interviews and transcripts of his talks with Ellison, made during the class period. “Defendants have intentionally destroyed evidence that would demonstrate Ellison’s knowledge and mental state at all relevant times � hundreds of hours of tapes and transcripts of interviews with Ellison,” according to Mark Solomon of Coughlin Stoia Geller Rudman & Robbins in San Diego. But that was the “tip of the iceberg,” he said in court papers. Although Ellison trafficked in hundreds of e-mails a day, “less than 15 emails, all self-serving, have been produced from Ellison’s files” during the period, Solomon claims. He also asserted that Oracle failed to preserve financial forecasting data in the 1999-2001 period of the final boom and bust of the dot-com companies that frequently bought Oracle software. In response, Oracle attorney Patrick Gibbs said, “Plaintiffs cannot prove that defendants lost or destroyed a single document that should have been produced, let alone that defendants did so with the ‘culpable state of mind’ necessary to impose the kind of drastic sanctions [they] seek.” Gibbs of Latham & Watkins’ Menlo Park, Calif., office said Oracle has turned over 2.1 million pages of documents and 209 data disks. Plaintiffs were also able to take 100 depositions and subpoena 100 Oracle customers in addition to the discovery from the two derivative cases. He said the plaintiffs’ counsel did not specifically request documents regarding Symonds’ book, Softwar, during the discovery period. Gibbs said Symonds produced 200 pages of transcripts but not all materials. Symonds told defense lawyers the laptop computer containing the audio files was damaged and given away to a computer repair shop. As for the accounting fraud claim, the debit accounting involved simultaneous and offsetting debits and credits, and “did not have any impact on Oracle’s financial statements,” Gibbs said in court papers. He attributed the sanctions claims to an overblown dispute over the outcome of past discovery battles. The suit also claims that Ellison sold 29 million Oracle shares during January 2001, just weeks ahead of the public release of bad news. The sale was Ellison’s first in five years and ahead of planned April trades, reaping $895 million. He still held more than a billion shares. The stock price sank by half when bad sales news was released and Oracle missed its Wall Street target in March 2001. Gibbs pointed to Vice Chancellor Leo Strine’s decision in the Delaware Chancery Court case In re Oracle Derivative Litigation, 867 A.2d 904 (New Castle Co., Del., Ch. 2004), in which Strine likened the insider trading claims against Ellison to “the ravings of conspiracy theorists.” Dario deGhetaldi, a plaintiffs’ attorney who worked on both derivative cases, said, “We were never satisfied that we got all the documents that existed. We probably got 25 or fewer e-mails that went to Ellison. That’s inconceivable. Critical reports were missing and there was an issue with destruction of backup tapes,” said deGhetaldi, of Cory, Lazaich, Plisk, deGhetaldi & Nastari in Millbrae, Calif. “If you ask me: ‘Do I believe Ellison had insider trading information,’ I’d say yes. The Delaware judge said it was crap and the California judge seemed to believe it. I don’t know what this judge will do,” he said. In the San Mateo County Superior Court case in California, Judicial Council Coordination Proceeding 4180 Oracle Cases, Ellison agreed to settle by paying $100 million to charity over a five-year period and $22.5 million in attorney fees. Oracle spokeswoman Deborah Hellinger said the company would not comment on the case. Neither Gibbs nor Solomon would comment beyond court papers.

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