Facebook's Fired Manager: I Did Nothing Wrong

The blogosphere has been abuzz today about TechCrunch's report that Facebook fired corporate development manager Michael Brownfor buying shares of the company on the private market. Sources tell me Facebook's general policy is that no current employee can buy or sell shares, which is why Brown was fired.


Mike Brown's attorney Ed Swanson just sent us the following statement from Mike Brown, acknowledging that he bought the shares and defending his intentions:

“False and damaging information has been published about my actions and in the interest of defending my character I feel it is necessary to make a statement. I did buy Facebook stock on the secondary market in early September 2010, and I did so with the absolute best of intentions and only because I believe in Facebook. As for any allegations regarding the Goldman Sachs /Facebook transaction, I had absolutely no knowledge of that transaction until it appeared in the press in January 2011.

I am saddened by the course of events that led to my departure and the incorrect reporting of it. I am now focused on moving on past this unfortunate series of events.”

Facebook can monitor whether its employees are purchasing shares — every time its shares are sold in the secondary market as a private placement Facebook has right of first refusal. A source at a platform that trades these shares tells me Facebook is meticulous, and certainly would take note of an employee name on a transaction. So if Brown had gone to SecondMarket, his request to trade likely would have been rejected.

That means Brown likely bought his shares through a private company fund, of which there are several, run by SharesPost, Felix, and Wedbush.

This shines the spotlight on funds of private company shares as an area where the SEC is likely to really crack down. These funds make private shares far more like securities, and when it comes to insider trading they're far harder for companies to monitor than individual transactions.

CNBC's John Carney has a great blog on Silicon Valley's Insider Trading Problem.

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