A Bay Area judge has thrown out a deal that would allow Oracle Corp. CEO Larry Ellison to use company funds to pay millions of dollars in attorneys’ fees in an insider-trading lawsuit—and Professor Jesse Fried says the ruling was right on the money.
San Mateo County Superior Court Judge John Schwartz on Monday, September 26, rejected an agreement between Ellison and plaintiffs under which Ellison would give $100 million to charities to settle the case; Oracle would pay the plaintiffs’ lawyers another $24 million. Schwartz said since Ellison and his personal stock sales were the subject of the suit, he couldn’t approve an arrangement under which the company and its shareholders footed the bill for the fees.
Fried, faculty co-director of Boalt’s Berkeley Center for Law and Business and an expert on corporate governance, told Bloomberg News Service that companies customarily pay attorneys’ fees only when the company is a clear beneficiary of the settlement. “This seems to be a collusive settlement between Ellison and the plaintiffs’ lawyer where Ellison is not paying anything out of pocket,” Fried told Bloomberg. “He gives money to charity anyway—and the lawyer gets paid $24 million by Oracle.” Schwartz scheduled a hearing in November to review the case and suggested the parties modify their deal in the meantime.