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By Carl Howe

MarketWatch.com reports that Robbie Bach, president of Microsoft's (NASDAQ:MSFT) Entertainment and Devices division, sold $6.2 million of Microsoft stock just prior to announcing that Microsoft was going to have to extend XBox 360 warranties to three years because of extensive failures. The filings note that this was not part of any scheduled diversification or selling program; this was a conscious, unscheduled sale by the guy in charge of releasing news that could affect the value of Microsoft stock.

Remember that the press reported breathlessly about how Steve Jobs was involved in Apple (NASDAQ:AAPL) options backdating, an activity that he did not directly profit by and is legal with proper accounting. Contrast that with this article quote:

"I'd give [Bach] the benefit of the doubt here, especially because the stock didn't move very much" after last week's announcement, [director of research at Indie Research, Ben] Silverman commented.

Insider trading is a very serious violation of the law; just ask Martha Stewart, who served five months in prison for avoiding losses of $43,000 through trades that just had suspicious timing (no insider trading was actually proven). This is $6.3 million that went straight into Robbie Bach's pocket. Microsoft should get ahead of the situation, call a true independent audit, and invite in the SEC before this event takes on a life of its own. Microsoft stock may not have dropped yet, but once the SEC starts running an investigation, it could.

MSFT 1-yr chart

MSFT

Source: Insider Trading Hasn't Affected Microsoft Stock - Yet