In Silicon Valley, You Can Be Worth Billions and It's Not Enough - The New York Times - 0 views
www.nytimes.com/...olsheimin-insider-trading.html
silicon valley enough rich wealth insider trading cheating ethics
shared by Javier E on 23 Apr 24
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He got a phone call about the imminent sale of a tech company and allegedly traded on the confidential information, according to charges filed by the Securities and Exchange Commission. The profit for a few minutes of work: $415,726.
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rarely has anyone traded his reputation for seemingly so little reward. For Mr. Bechtolsheim, $415,726 was equivalent to a quarter rolling behind the couch. He was ranked No. 124 on the Bloomberg Billionaires Index last week, with an estimated fortune of $16 billion.
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Last month, Mr. Bechtolsheim, 68, settled the insider trading charges without admitting wrongdoing. He agreed to pay a fine of more than $900,000 and will not serve as an officer or director of a public company for five years.
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Nothing in his background seems to have brought him to this troubling point. Mr. Bechtolsheim was one of those who gave Silicon Valley its reputation as an engineer’s paradise, a place where getting rich was just something that happened by accident.
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“He cared so much about making great technology that he would buy a house, not furnish it and sleep on a futon,” said Scott McNealy, who joined with Mr. Bechtolsheim four decades ago to create Sun Microsystems, a maker of computer workstations and servers that was a longtime tech powerhouse. “Money was not how he measured himself.”
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researchers who analyze trading data say corporate executives broadly profit from confidential information. These executives try to avoid traditional insider trading restrictions by buying shares in economically linked firms, a phenomenon called “shadow trading.”
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“There appears to be significant profits being made from shadow trading,” said Mihir N. Mehta, an assistant professor of accounting at the University of Michigan and an author of a 2021 study in The Accounting Review that found “robust evidence” of the behavior. “The people doing it have a sense of entitlement or maybe just think, ‘I’m invincible.’”
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He went to Stanford as a Ph.D. student in the mid-1970s and got to know the then-small programming community around the university. In the early 1980s, he, along with Mr. McNealy, Vinod Khosla and Bill Joy, started Sun Microsystems as an outgrowth of a Stanford project. When Sun initially raised money, Mr. Bechtolsheim put his entire life savings — about $100,000 — into the company.
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“You could end up losing all your money,” he was warned by the venture capitalists financing Sun. His response: “I see zero risk here.”
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An impromptu demonstration was hastily arranged for 8 a.m., which Mr. Bechtolsheim cut short. He had seen enough, and besides, he had to get to the office. He gave them a check, and the deal was sealed, Mr. Levy wrote, “with as little fanfare as if he were grabbing a latte on the way to work.
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Mr. Page and Mr. Brin couldn’t deposit Mr. Bechtolsheim’s check for a month because Google did not have a bank account. When Google went public in 2004, that $100,000 investment was worth at least $1 billion.
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It wasn’t the money that made the story famous, however. It was the way it confirmed one of Silicon Valley’s most cherished beliefs about itself: that its genius is so blindingly obvious, questions are superfluous.
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The dot-com boom was a disorienting period for longtime Valley leaders whose interest in money was muted. Mr. Bechtolsheim’s Sun colleague Mr. Joy left Silicon Valley.
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“There’s so much money around, it’s clouding a lot of people’s ethics,” Mr. Joy said in a 1999 oral history
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Mr. Bechtolsheim didn’t leave. In 2008, he co-founded Arista, a Silicon Valley computer networking company that went public and now has 4,000 employees and a stock market value of $100 billion.
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Mr. Bechtolsheim was chair of Arista’s board when an executive from another company called in 2019, according to the S.E.C. Arista and the other company, which was not named in court documents, had a history of sharing confidential information under nondisclosure agreements.
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immediately after hanging up, the government said, he bought Acacia option contracts in the accounts of a close relative and a colleague. The next day, the deal was announced. Acacia shares jumped 35 percent.
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Arista’s code of conduct states that “employees who possess material, nonpublic information gained through their work at Arista may not trade in Arista securities or the securities of another company to which the information pertains.”
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Mr. Levy, the “In the Plex” author, said there were plenty of legal ways to make money in Silicon Valley. “Someone who is regarded as an influential funder and is very well connected gets nearly unlimited opportunities to make very desirable early investments,”