Oracle accused of 'improper accounting' in attempt to pump-up cloud sales

Former finance executive claims that Oracle executives tried to illegally pump-up cloud revenues

Oracle is facing a lawsuit from a former finance manager accusing the company of improper accounting practices.

Certified public accountant Svetlana Blackburn claims that she was pushed by top management into moulding financial data in order to make it look like Oracle's cloud computing services were growing faster than they really are.

She claims she was elbowed out, despite positive performance reviews, "because she resisted, refused to engage in and threatened to blow the whistle on accounting practices she reasonably believed to be unlawful", according to the lawsuit filed in the US District Court in North California.

It continues: "Upper management was trying (and trying to push her) to fit square data into round holes, in an effort to bolster Oracle Cloud Services financial reports that would be paraded before company leadership as well as the investing public."

The filing goes on to suggest that Blackburn was being pushed to recognise revenues in cloud computing in contravention of the Sarbanes-Oxley accounting laws, as well as Generally Accepted Accounting Principles (GAAP). As an accountant, Blackburn could be drummed out of the profession and thrown in jail if she were found to be acting in contravention of Sarbanes-Oxley.

The filing goes on to explain that her "superiors instructed her to add millions of dollars in accruals to financial reports, with no concrete or foreseeable billing to support the numbers, an act that Plaintiff warned was improper and suspect accounting. She told her supervisor, 'I will blow the whistle' if ordered to proceed further in this fashion.

"The data, she knew, would end up in SEC filings and be touted on earnings calls, used to paint a rosier picture than actually existed on the ground. Dollar amounts that might seem modest on their face would propagate through other data, influencing a host of statements on reports made to the investing public.

"Executives above her in the chain of command went ahead and added accruals on their own; once again, Plaintiff objected. She expressed serious misgivings about their plans for re-accruals as well. A supervisor instructed her to ignore the absent billings that she had pointed out, because his intention was to re-accrue."

After a late volte face over cloud computing by Oracle founder and executive chairman Larry Ellison, who in 2008 declared "What the hell is cloud computing? ... I mean, it's really just complete gibberish", Oracle shifted into cloud computing with a string of big acquisitions.

In recent years, Oracle has claimed fast growth for its cloud computing offerings, which increasingly hasn't been enough to offset declining software licence sales.

And it wouldn't be the first time that Oracle has been accused of playing fast-and-loose on revenue recognition and other accounting rules. In 1990, four years after its $31.5m initial public offering, the company was nearly bankrupted in an accounting scandal when it was accused of over-stating revenues.

UPDATE: Oracle denies false accounting over cloud computing growth claims