Even though the Mountain View, California-based company fired CEO Amnon Landan, CFO Douglas Smith, and general counsel Susan Skaer as a result the scandal, it has now been warned by the SEC that it intends to file civil proceedings against directors Igal Kohavi, Yair Shamir, and Giora Yaron.

While the three directors deny that they have violated Federal Security laws and did not know of the options backdating, they have withdrawn from board committees considering the issue.

However, since the Mercury share price collapsed in November after the company admitted wrong-doings over stock options, and it was subsequently thrown of Nasdaq due to late filing, its shares have risen by 38% on the over-the-counter market amid continued takeover rumors. Israeli business journal Globes Online even claimed that Mercury had been holding a kind of discrete auction for itself.

But its reputation has been badly tarnished by the affair, and this is particularly damaging for a company that offers software to help companies with corporate governance issues. Mercury will also draw little comfort from the fact that CA Inc, its principal competitor in the application-management market, has been forced to delay its annual filing for the year to March 31 because of the need to restate prior accounts because of stock-option errors.

After an investigation, Mercury said it found that the price of our common stock was substantially lower on the reported exercise date than on the date the option was actually exercised. While this boosted receipts to all levels of recipients, it said the inquiry found that members of prior management were each aware of and, to varying degrees, participated in the practices.

It warned that the reporting of such incorrect dates ordinarily would have had the effect of significantly reducing the individuals’ taxable income, resulting in underreported liabilities for withholding taxes and exposing us to possible penalties for failure to pay such withholding taxes.

Mercury said it is cooperating in the continuing formal SEC investigation of the company.