Posted On Wednesday, March 23, 2016
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A former Microsoft senior finance manager agreed on Friday to settle charges that he traded on material nonpublic information about Microsoft’s acquisition of Nokia Corporation’s mobile phone business. The insider-trading charges were outlined in a complaint filed on the same day in U.S. District Court in Seattle by the SEC. The settlement, which includes a combination of disgorgement and civil penalties totaling nearly $380,000, is pending court approval.
According to the SEC’s complaint, John E. Hardy, III, was employed in Microsoft’s corporate financial planning and analysis group. While employed there, Hardy purchased put options after learning from highly confidential internal Microsoft documents that the company’s fiscal-year 2013 financial results would not meet Wall Street analysts’ expectations. On July 18, 2013, Microsoft issued an earnings release containing those financial results. Following the issuance of that release, Microsoft’s stock price decreased by more than 11%. Shortly after the announcement, Hardy sold the put options, realizing gains of approximately $9,000.
The complaint also alleged that Hardy purchased Nokia call options in August of 2013 after learning in the course of his work in the financial planning and analysis group that Microsoft was planning to acquire Nokia’s mobile phone business. The acquisition was announced publicly on September 2, 2013, resulting in the price of Nokia shares rising more than 30%. Hardy sold is Nokia call options shortly thereafter, resulting in profits of approximately $175,000.
The complaint asserted claims of violations of § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Hardy consented to the entry of a judgment permanently enjoining him from violating those provisions of the securities laws. In addition, he agreed to disgorge all of his ill – gotten gains of $184,132, pay a one-time civil penalty of $184,132, and pay prejudgment interest of $11,389, for a total payment of $379,653 to resolve charges. He also agreed to a five-year bar from serving as an officer or director of a publicly-traded company.
On numerous occasions, Microsoft has publicly stated its “zero tolerance” of employees engaging in unauthorized insider trading. In its complaint, the SEC made a series of allegations concluding that Hardy had breached his duties to Microsoft and its shareholders by violating the company’s insider trading policy, as set forth in the Microsoft Employee Handbook.
As part of the settlement, Hardy neither admitted nor denied the SEC’s factual allegations. A complete copy of the SEC’s complaint can be found here.
Posted On Tuesday, March 22, 2016
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On Friday, HHS-OIG issued an advisory opinion (No. 16-3) regarding the use of a “preferred hospital network” as part of Medicare Supplemental Health Insurance (“Medigap”) policies. At issue in the requested opinion was a proposed arrangement for two insurance companies (owned by the same parent) to indirectly contract with hospitals for discounts on Medicare inpatient deductibles for their policyholders. OIG determined that the proposed arrangement would not constitute grounds for sanctions under the civil monetary penalty provision of the Social Security Act, and that the arrangement would not provide a basis for sanctions under the Federal Anti-Kickback Statute.
The insurers making the request indicated that they planned to start offering Medigap policies in several states. As part of that plan, they proposed to participate in an arrangement with a preferred hospital organization (“PHO”) that has contracts with hospitals throughout the country (“network hospitals”). Under the proposal, the network hospitals would provide discounts of up to 100% on Medicare inpatient deductibles incurred by the insurers’ Medigap policyholders that otherwise would be covered by the insurers. Each time the insurers received this discount from a network hospital, the insurers would pay the PHO a fee for administrative services. If a policyholder were to be admitted to a hospital other than a network hospital, the insurers would pay the full Part A hospital deductible, as provided under the applicable Medigap plan. The insurers indicated that they would return a portion of the savings resulting from the proposed arrangement by issuing a $100 premium credit directly to any policyholder who has an inpatient stay at a network hospital.
OIG ultimately concluded that, although the proposed arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute if the requisite intent to induce referrals were present, the OIG would not impose administrative sanctions. Moreover, although the OIG did not find that the proposed arrangement qualified for “safe harbor” protection, it did find that the proposed arrangement presented a sufficiently low risk of fraud or abuse under the anti-kickback statute. Specifically, it noted that neither the discounts nor premium credits would increase or affect per-service Medicare payments. It also found, among other things, that the proposed arrangements would operate transparently, and would be unlikely to increase utilization, affect competition or impact professional medical judgment.
OIG also found a sufficiently low risk of fraud or abuse under its civil monetary penalty analysis. Based on that and the totality of facts and circumstances that it reviewed, it found that it would not impose administrative sanctions.
A complete copy of the advisory opinion can be found here.
