In a statement, the FTC said Gates violated the Hart-Scott-Rodino premerger notification act by not reporting that he had exceeded a 10 percent holding in ICOS. The commission said that because Gates had earlier failed to report reaching the 10 percent threshold in conjunction with his holdings of Republic Services, the commission felt that it needed to seek a fine.
"Although the commission has often declined to seek penalties from a party that makes an inadvertent mistake and fails to file, once he is aware that he doesn't have a complete understanding of the HSR Act, he needs to go back and learn about the act so he doesn't make a second mistake," Barry Nigro, deputy director of the FTC's Bureau of Competition, said in a statement.
Although either the FTC or Department of Justice can investigate claims, in this case, the FTC investigated the case, while the Justice Department filed a formal complaint Monday in federal court. Gates has agreed to settle the charges, an FTC representative said.
Nigro noted that the fine was less than the maximum the agency could have sought. "Mr. Gates cooperated with the bureau's investigation and agreed to settle the matter quickly, before the commission was required to invest significant resources."
In a statement, a lawyer for Gates' investment arm said Gates was not personally involved in the transaction in question.
Mark Beatty, general counsel of Gates' Cascade Investment Group, said his firm missed the filing requirement when it exercised a stock option that was nearing expiration.
"We missed a filing but voluntarily notified the FTC of our mistake upon our own discovery of this," Beatty said. "Since that time, we have cooperated fully with the FTC and will continue to do so as requested. In addition, a series of procedures has been implemented to avoid this type of oversight in the future."
Gates exceeded the 10 percent threshold with regards to Republic Services in November 2001, the FTC said. The agency said it notified Gates at the time that it was not seeking a civil penalty for that violation but told Gates that he "is accountable for instituting an effective program for entities he controls to ensure full compliance with the act's requirements."
However, the commission said that six months later, in May 2002, Gates again violated the antitrust law when he acquired shares in ICOS without making the required filing.