Oracle Accused of Defrauding Investors on Cloud Sales Growth

Oracle is named in a lawsuit alleging the company’s executives lied to shareholders when they explained why cloud sales were growing, according to Bloomberg.

The investor leading the case, the City of Sunrise Firefighters’ Pension Fund, claimed Oracle engaged in coercion and threats to sell its cloud-computing products, creating an unsustainable model that fell apart, according to the suit seeking class-action status. The pension fund and other investors lost money when Oracle’s stock plummeted in March after reporting a disappointing earnings report and outlook, according to the lawsuit.

“The suit has no merit and Oracle will vigorously defend against these claims,“ Deborah Hellinger, a spokeswoman for Oracle, said in a statement. The suit claimed that Oracle’s executives lied in forward-looking statements, which are never guaranteed, during earnings calls and at investor conferences in 2017 when they said customers were rapidly adopting their cloud-based products and cloud sales would accelerate.

The firefighter pension fund, which manages about $143 million for 235 participants, alleged that Oracle used software license audits and weakened existing maintenance programs to compel customers to buy the cloud products. “In truth, Oracle drove sales of cloud products using threats and extortive tactics,“ the filing reads. “The use of such tactics concealed the lack of real demand for Oracle’s cloud services, making the growth unsustainable (and ultimately driving away customers).“ These tactics weren’t known to investors and were “expressly denied by the company,“ it added.