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    ORACLE ADMITS IT HAD MICROSOFT INVESTIGATED

    07/29/2000
    on 7/29/00.

    Microsoft lashed out at Oracle Corp. yesterday after the California firm acknowledged it hired a prominent detective firm to investigate groups sympathetic to the Redmond software maker.

    Oracle's efforts yielded documents that embarrassed Microsoft in the middle of its antitrust battle with the government.

    Microsoft said the investigation could be just one of a string of anti-Microsoft activities its rivals have engaged in.

    "These published reports may only be the tip of the iceberg . . . ," Microsoft said without elaborating.

    Oracle's admission this week followed reports linking the detective firm, Investigative Group International, to an unsuccessful attempt this month to obtain documents from a pro-Microsoft trade group, the Association for Competitive Technology, by offering payments to janitors at the group's Washington office.

    Oracle said the investigations on its behalf had established that the association and two other organizations "were misrepresenting themselves as independent advocacy groups, when in fact their work was funded by Microsoft for the express purpose of influencing public opinion in favor of Microsoft during its antitrust trial."

    Oracle acknowledged yesterday that it funded a probe into various trade associations with ties to Microsoft. Chief executive Larry Ellison said he considered it his "civic duty."

    Documents from two of the organizations were cited in articles in The New York Times and The Wall Street Journal showing that the groups had received financing from Microsoft.

    An official of one of the groups said he thought documents that later showed up in the press were on two laptops stolen from the group last June. But an Oracle spokesman said the company had stipulated to the detective firm that nothing illegal was to be done in the operation.

    "When Oracle asked IGI to investigate numerous Microsoft front organizations, we didn't specify how IGI should go about gathering information," the spokesman said. "We did, however, insist that whatever methods IGI employed must be legal. " He said Oracle was repeatedly given such assurances.

    Norman Harrison, president and chief executive of the detective firm, issued a statement saying he had no comment.

    The episode indicates the profound bitterness of the software-industry rivalry between Microsoft and Oracle, companies headed by two of the world's richest men: Bill Gates of Microsoft and Larry Ellison of Oracle.

    Vivek Varma, a Microsoft spokesman, said, "This is further proof that our competitors have conducted and paid for and orchestrated a public relations and lobbying campaign to generate government intervention into a industry that is highly competitive and delivering for consumers."

    Oracle closed up 94 cents at $82.94. Microsoft closed up 13 cents at $78.94.

    Lenzner, a one-time Watergate investigator, has come to prominence in recent years in his work for the tobacco industry and the Clinton White House, gathering information on their accusers. A Microsoft law firm even hired the Lenzner firm earlier this year to assist in a software piracy and counterfeiting case.

    Oracle said it had retained the detective firm in June 1999 to investigate the Independent Institute of Oakland, a free-market policy institute that had just placed full-page advertisements defending Microsoft - signed by 240 academic figures and portrayed as reflecting independent views - in The Washington Post and The New York Times.

    In September, The New York Times, citing internal institute documents, reported that the Independent Institute's ad was actually paid for by Microsoft. The Times said the documents had been provided by a Microsoft adversary associated with the computer industry who refused to be further identified.

    A Times spokeswoman, Catherine Mathis, said it has long been the paper's policy not to disclose the names of confidential sources.

    Last month, an article in The Wall Street Journal reported that the National Taxpayers Union, which had issued a study blaming the antitrust case for a loss of value in state pension funds, had received financing from Microsoft. It attributed the information to a person familiar with the group's corporate fund raising.

    "We take it that there has been no suggestion of any improper activity by The Journal, or any knowledge by The Journal of any such activity by any of its sources, and we know of none," said Richard Tofel, a spokesman for the newspaper.

    The other group that Oracle acknowledged was a target of the investigation, the Association for Competitive Technology, is a pro-Microsoft trade group. According to documents from the company that manages the association's office space, a woman offered two cleaning workers cash on two occasions early this month to hand over trash from the group's office.

    The offers were rebuffed. The woman making them was reported to have gained access using a key from another tenant, whose credit application bore the name of an investigator identified as a past agent of the Lenzner firm.

    An Oracle executive said the company knew nothing about that incident other than what had been reported in the press.

    And the executive said Oracle had had no involvement in another episode, in which Microsoft's support for a free-market lobbying group called Citizens for a Sound Economy was reported in The Washington Post.

    Both that group and the Independent Institute reported recent thefts of laptop computers from their offices that they said might have contained documents that later appeared in the press.

    The targets of the Oracle-backed investigation expressed outrage this evening, suggesting that the company was guilty of the same type of tactics of which it has accused Microsoft.

    "It's despicable," said Jonathan Zuck, president of the Association for Competitive Technology. "I would hope to get a letter of apology from Larry Ellison and an explanation of how, in a climate over so much concern over the issue of privacy, he could think this is an acceptable business practice."

    He said he is considering legal action over what he said was a violation of his employees' privacy in the trash-buying attempt.

    "This is not Dumpster-diving in offices outside the building, this is bribery," he said. "It's also a security issue."

    Repeated requests by phone and e-mail for comment from Ellison, the Oracle chairman, were unavailing.

    David Theroux, president of the Independent Institute, said Oracle had called into question its own credibility. "Clearly anybody who stoops to whatever was done here, you can't trust," he said.

    He asserted that the documents were cited in The Times obscured the debate because they implied that the Independent Institute was a front for Microsoft. Theroux said the Institute was advocating free-market policies for years before Microsoft ever became a supporter.

    "It's unfortunate that instead of engaging the issues in a visible public forum," Theroux said, speaking of Oracle, "it was considered to be appropriate to use subterfuge and back-alley tactics to deal with the issues."

    John Berthoud, president of the National Taxpayers Union, based in Alexandria, Va., said, "It's disappointing but perhaps not unexpected that Microsoft opponents, who are trying to use the American judicial system to run down Microsoft, would stoop to these kind of political tactics against the voices of the free market."

    Berthoud said he had been approached by reporters saying they had been given internal financial documents from his group. He said he had not seen the documents and could not verify their authenticity. According to the Center for Responsive Politics, Microsoft spent more than $3.7 million on lobbying in 1998 and Oracle spent $1.9 million... This New York Times report includes information from Reuters and The Associated Press.