• News Ticker alerts

Richard Pearson of Seeking Alpha has an excellent story, dated April 1, on massive insider selling at San Diego's ServiceNow, an information tech company that went public last summer. "ServiceNow insiders have now sold over $400 million of stock, even after its [Initial Public Offering]" in which insiders also dumped shares. Just in the past eight weeks, insiders have sold $80 million of shares, notes Pearson. "In the past, ServiceNow directors and management, including founder Frederic Luddy and directors John Moores and Charles Noell, were big early sellers of their previous venture, Peregrine Systems," which was one of San Diego's largest financial frauds. "They pulled in over half a billion dollars from sales of stock -- even though these sales had occurred during RESTRICTED PERIODS designed to prevent selling by insiders."

Luddy has already dumped $12.7 million worth of ServiceNow stock, Moores $20.6 million and Noell $9.1 million, reports Pearson. Another seller has been JMI Funds, connected to both Moores, its namesake, and Noell.

"ServiceNow Director John Moores had previously been chairman of Peregrine Systems, and his [venture capital] firm JMI Capital held a substantial stake. He had recruited Fred Luddy to assume the eventual role of chief technology officer," writes Pearson. "ServiceNow Director Charles Noell served as a Peregrine director and as the audit committee chairman."

Moores was chairman of Peregrine from 1990 to 2000 and from May 2002 through March 2003. He had an office in the building. He had selected many of the top executives, according to civil suits. He had paid 33 cents to 59 cents apiece for his stock. Civil and criminal investigators charged that the company was massively inflating its revenues through phony transactions. A number of officers pleaded guilty to criminal charges and were incarcerated. But Moores and the board got off -- rising eyebrows about bad judges and regulators. Moores dumped $487 million of Peregrine stock during the fraud period, and $650 million worth -- almost all he controlled -- from the time he began accumulating the shares. Other board members also sold heavily. But in the end, directors paid only a total of $56 million to settle lawsuit claims.

  • News Ticker alerts

Comments

Dennis April 3, 2013 @ 4:57 p.m.

It is amazing that these types of scams continue & nobody goes to jail, at least not the ones at the top of the heap. The latest Moores deal sounds just like a Ponzi scheme.

0

Don Bauder April 3, 2013 @ 9:48 p.m.

Dennis: I wouldn't call it a Ponzi. It's just one of those cases in which the insiders get in cheap and dump as fast as they can, often for enormous profits, as Moores did with Peregrine. ServiceNow moved up quickly after the IPO and the insiders jumped out. They probably had lawyers who, following the letter and not the spirit of the law, figured out a way to make it legal. Best, Don Bauder

0

Ponzi April 5, 2013 @ 9:07 a.m.

Some investors watch their money go up in smoke, ServiceNow investors watch it go up into a cloud.

0

Don Bauder April 5, 2013 @ 12:22 p.m.

Ponzi: And the cloud dumps that money into the pockets of insiders who have pulled this stunt before -- specifically, with Peregrine, but also with other hot new issues. Best, Don Bauder

0

Sign in to comment