Microsoft ex-worker is accused of fraud

Bellevue resident Richard Gregg pleaded not guilty in U.S. District Court in Seattle to 62 counts of mail fraud and computer fraud in a continuing six-month federal investigation into abuse of Microsoft’s now-redesigned employee software-ordering system.

Yesterday’s indictment charges Gregg, 48, with selling 31 pieces of software intended for internal use only. The software was worth $17 million, according to federal authorities. Each sale carries one count of mail fraud and one count of computer fraud.

That means, if convicted, Gregg faces a theoretical maximum penalty of life in prison and $15 million in fines, as well as years of supervised release. But Assistant U.S. Attorney Hugh Berry said yesterday the penalty will probably be less than that, because charges for various counts are usually combined.

Gregg also faces the forfeiture of his property, including a 1999 Land Rover Discovery, a 2002 BMW M3, and the contents of two savings accounts and two checking accounts.

Gregg, who could not be reached for comment, sold his Bellevue condominium last month for $175,000, property records show. On those records he lists a rented Bellevue mailbox as his forwarding address.

The former Microsoft employee turned himself in voluntarily yesterday morning and was released without bond. No trial date was set, but Berry said the trial will probably take place by late August.

Gregg served as project coordinator for Windows development before being fired in December 2002. As such, he was entitled to use Microsoft’s MS Market program, which is intended to let Microsoft employees order software — for internal use only — at no cost. Company policy forbids selling the products.

The indictment alleges that Gregg ordered products, then sold them over a one-year period ending in December 2002, “retaining any proceeds received for his own personal use and enrichment.”

In total, he received a total of 5,436 pieces of software, with a total retail value of more than $17 million, the indictment says. That software ranged from home-oriented products such as the Windows XP Home operating system — worth $200 at retail — to heavy-duty corporate products such as the SQL Server database server, worth nearly $20,000.

Selling the software was a federal offense because Gregg used interstate carriers such as Airborne Express, the indictment says. It doesn’t name any buyers.

Yesterday’s indictment was the second handed down since December 2002, when former Microsoft director Daniel Feussner was arrested for allegedly selling $9 million of software to support his lavish lifestyle.

On Feb. 7, Feussner, a German national, was found dead after drinking ethylene glycol, the main ingredient in antifreeze. Charges against him were dropped.

Microsoft in December said it had acted against an undisclosed number of employees who abused the ordering system. The system was changed after Feussner’s arrest, and there’s now “very stringent managerial involvement at every level,” said Microsoft spokeswoman Stacy Drake.

No abuse has taken place since the system was changed, but the investigation into past abuses continues, she said. More indictments are “always possible, but they’re not imminent,” said U.S. Attorney John Harding yesterday.

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