The SEC yesterday sued McAfee’s former general counsel Kent Roberts, charging that he committed securities fraud by changing the date on options grants once in 2000 and once in 2002.
While nobody else from McAfee has been sued, the complaint claims that the company’s vice president of human resources and former CEO George Samenuk, and possibly one other individual, were aware one or both incidents.
The SEC alleges that Roberts, secretly and without authorization, changed the date of a stock option grant to himself in February 2000, in order to take advantage of a lower McAfee share price.
Roberts and another former McAfee employee the complaint does not name changed the date of an options grant of 20,000 shares from February 14 2000 to April 14 2000, the SEC claims.
Over that period, the beginning of the dot-com bust, McAfee’s shares had gone down by almost $10 per share, and Roberts stood to gain $197,000 from the change in grant date, the complaint says.
Roberts also allegedly falsified the minutes of a 2002 meeting of McAfee’s compensation committee in order to postdate an options grant date for a grant to Samenuk, according to the complaint.
A one-day date change from January 15 to January 16 added a potential $739,200 boost to the value of the grant, because of an almost $2 share price dip that day, the SEC said.
The SEC alleges that Roberts sent emails to Samenuk and the VP of HR, alerting them to the change in the grant date for the Samenuk options. The complaint does not claim that Samenuk knew about the alleged falsification of minutes.
Samenuk took early retirement in October last year, saying at the time, I regret that some of the stock option problems identified by the special committee occurred on my watch.
Company president Kevin Weiss went at the same time as Samenuk. Roberts himself was fired in May 2006 after he told the company’s board about the 2000 grant, the SEC said.
Options backdating investigations are currently affecting well over 100 US companies, many of them in the technology industry, though there have been only a handful of charges filed against individuals.
By changing the date of an options grant, executives at public companies were able to benefit from lower exercise prices, and thus higher profits, when they later sold their shares.
