Microsoft manager accused of $9 million fraud scheme
The young Microsoft manager was so proud of his possessions he displayed them on a personal Web page.
But federal agents allege his newfound wealth was derived from a scheme in which he ordered $9 million in Microsoft software, ostensibly to be used in-house, then sold it on the street at reduced prices.
In a criminal complaint unsealed yesterday in U.S. District Court in Seattle, Feussner was accused of 15 counts of wire, mail and computer fraud. Each count carries a maximum of five years in prison, according to prosecutors.
Feussner, 32, of Sammamish, was arrested at Microsoft's Redmond campus yesterday and made an initial appearance before U.S. Magistrate John L. Weinberg. He is expected to remain in custody until a preliminary hearing set for Dec. 20. Prosecutors then have 30 days to take the case before a grand jury for formal charging, said Assistant U.S. Attorney Hugh Berry.
According to an FBI affidavit accompanying the complaint, the accusations stem from an ongoing investigation into current and former Microsoft employees selling high-end applications acquired illegally through the software giant's Internal Product Ordering (IPO) system.
Feussner, director of retrieval technology, was in charge of the search engines at Microsoft.com that are used by tens of millions of people per month, according to a biography he provided to the Bellevue Breakfast Rotary Club, which he joined this year.
A Microsoft spokeswoman said Feussner was fired yesterday but declined to discuss specifics of the case or his employment history.
"For reasons of privacy it's our policy not to discuss personnel issues," spokeswoman Stacy Drake said.
The complaint alleges that between Dec. 3, 2001, and Nov. 25 this year, Feussner ordered or used his assistant and other employees, including a high-school intern, to order nearly 1,700 business applications through the IPO system.
The applications included Windows 2000, SQL Server 2000 Enterprise Edition and Visual Studio, with retail values ranging from $1,800 to $20,000.
The orders were sent to a Microsoft vendor, Client Logic, in Buffalo, N.Y., which pulled the software from its warehouse in Ohio and shipped the software to Microsoft's Redmond campus. The software was then delivered from the mailroom to Feussner's desk, the affidavit alleges. Federal prosecutors allege that he then sold the software and kept the proceeds.
In June, FBI agents said they saw Feussner exchanging a large box of software for cash in a Fred Meyer parking lot in Bellevue.
According to an FBI affidavit, the agency contacted Microsoft security investigators and began monitoring Feussner and his bank accounts. Last year, one account with Washington Mutual Bank had an average balance of $2,158.92. From Feb. 25 on, the average balance ballooned to $129,774.51, the affidavit said.
Another account with Wells Fargo showed irregular deposits totaling a half-million dollars, none of which appeared to be from "any legitimate income or other legitimate source," the affidavit states.
The big-ticket purchases
Investigators also noted Feussner's purchases. Over a
10-month period beginning in February, Feussner allegedly purchased a $95,000 Ferrari F355 Berlinetta, a $36,000 Jaguar XJ6 and traded in lesser vehicles for a Hummer H1, a Mercedes 500SEL and a $21,000 Harley-Davidson, the affidavit states.
He also bought an $8,000 oval diamond ring, a $2,230 Rolex wristwatch and a $4,000 bracelet.
Then, in August, he put down $65,000 for a 51-foot yacht named the Brazilian Queen, financing the remaining $120,000, according to the affidavit. His Web site lists the yacht at 58 feet.
Drake of Microsoft said the company is cooperating with prosecutors.
"We take employee theft very seriously and realize the effect it can have on the value we provide our customers and our shareholders," she said. "We have a number of internal measures in place to identify theft and work very closely with the appropriate authorities on these matters."
Monitoring expenses has been a challenge at a company where thousands of employees are hired every year and billions of dollars of revenue are received every month. But over the past two years, executives have touted new Web-based systems, including the IPO system, that employees use to order supplies.
Any large-scale theft may have come to light in the past year as the company put more emphasis on controlling costs. With overall technology spending slowing, executives have ordered managers to closely monitor expenses and have given vice presidents greater responsibility for balance sheets.
A Microsoft source said other employees named in the complaint are not suspected of acting illegally. They were apparently following orders from their supervisor, Feussner, to order the software.
Feussner, a native of Munich and an expert in search-engine technology, is known for his outgoing personality and waist-length dreadlocks, which he claimed had not been cut since 1987.
In the past year he joined the Bellevue Breakfast Rotary Club, where he seemed more outgoing and personable than the stereotypical techie, said Steve Goldfarb, a Bellevue jeweler and immediate past president of the club. "He seemed like what I would expect a genius software developer to be," he said.
At Microsoft, Feussner was placed in charge of the company's online search engines earlier this year. He also was developing a new search-engine platform using artificial intelligence to identify and index content, according to a report he gave to the Rotary Club when he hosted a club meeting at Microsoft in April.
Before coming to Microsoft, Feussner worked at the AltaVista Web search engine, earned a doctoral degree and taught at the University of Munich in Germany.
On his Web page, Feussner describes himself as "The Dude" and says that before he discovered computing, he wanted to become a rock star or a motorcycle mechanic.
"Maybe I'll do this later," the Web page states.
The page includes a camera for monitoring his cat, Mr. Mietze Lebowski, and has photos of his yacht, cars and other treasures.
"You figured that I like big boy's toys by looking at some of the pictures," he wrote. "I just can't resist."
Ray Rivera: 206-464-2926 or rayrivera@seattletimes.com.
Brier Dudley: 206-515-5687 or bdudley@seattletimes.com.