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Akamai launching own inquiry

Executive says firm surprised by insider trading investigation

By Hiawatha Bray
Globe Staff / October 29, 2009

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In his first public comments on the insider trading investigation involving Akamai Technologies Inc. in Cambridge, chief executive Paul Sagan said the scandal had taken the company by surprise.

“We learned about the allegations the same way most of you did, via news reports on Oct. 16,’’ Sagan said during a conference call with financial analysts to announce Akamai’s third-quarter earnings. Sagan added that company officials “have not been notified by any law enforcement entity of any wrongdoing by the company.’’

Sagan’s remarks did not reveal whether Akamai officials know the identity of the “Akamai executive’’ mentioned in two federal criminal complaints.

Six people were arrested earlier this month and charged with securities fraud in one of the biggest insider trading cases involving a hedge fund in US history. The six defendants allegedly generated $20 million in profits through illicit trading in the stocks of several high-tech companies.

One of the companies was Akamai, the world’s leading provider of Internet content delivery services such as high-quality video and audio streams. The federal complaints said that in July 2008, traders received inside information from an unnamed Akamai executive, warning them that the company’s stock was likely to fall in value. Because the traders got this information before it became known to the public, they were able to make nearly $6 million in illegal profits, the complaints said.

“At this time, we do not know if any of the claims made in the complaints are true,’’ said Sagan. “We have begun our own internal investigation. If we are able to determine that someone at Akamai has done something wrong, we will take swift and appropriate action.’’

Meanwhile, Akamai said its third-quarter earnings declined slightly from the same period in 2008. The company posted a quarterly profit of $32.7 million compared with $33.4 million the year before, higher than analysts had forecast. Total revenues also exceeded forecasts, rising from $197.3 million in 2008 to $206.5 million in 2009.

Akamai announced its earnings after yesterday’s market close. The company’s shares dropped 80 cents yesterday to close at $20.16 on the Nasdaq stock exchange.

Hiawatha Bray can be reached at bray@globe.com.