The stock-options backdating scandal just won't go away.
Apple Inc. shareholders last week filed a class action lawsuit charging former CFO Fred Anderson and other executives with intentionally filing false documents in an attempt to conceal stock option grants to executives. The suit came shortly after the Department of Justice (DOJ) reportedly dropped its federal probe of Apple itself and its CEO, Steve Jobs. Neither the DOJ nor Apple would comment.
Also, the Securities and Exchange Commission (SEC) accused Microtune ex-CFO Nancy Richardson and other colleagues of civil fraud, days after the SEC settled an options backdating case with cable-chip maker Microtune itself. Richardson's attorney Susan Resley, said in a statement, that she will fight the charges, which seek financial penalties and other relief under the “clawback” provision of the Sarbanes-Oxley Act to recover money executives wrongfully earned while misleading investors. “From the day Ms. Richardson walked into the job until the day she left, she lost money on the options the SEC alleges she backdated,” Resley said, adding that Richardson stopped the improper practice as soon as it came to her attention.
While that may sound harsh, former SafeNet Inc. Carole Argo suffered a worse fate. She was sentenced to six months in prison earlier this year and fined $1 million for her role in the improper timing of millions of dollars of employee stock option grants.
Some CFOs have avoided imprisonment by cooperating with federal authorities investigating their colleagues. Former Comverse Technology Inc. CFO David Kreinberg, for example, paid almost $3 million in penalties, while helping SEC officials gather evidence against Comverse and its executives. As a result, general counsel William Sorin was sent to jail for one year and one day. And without admitting guilt, Apple's Anderson last year consented to pay $3.5 million in fines and penalties, while throwing the blame to Jobs and agreeing to cooperate in the just-ended DOJ investigation.
In one of the latest indictments to be unsealed, ex-Broadcom Corp. CFO William Ruehle, free on $2.6 billion bond, may have less room to negotiate. Indeed, Ruehle pleaded not guilty to charges of filing false statements with the SEC, committing wire fraud and falsely certifying financial reports and faces up to 370 years in prison if convicted on all counts. Broadcom is the poster child for the backdating scandal. It had to restate 2007 earnings after trying to conceal more than $2 billion in compensation costs.
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