Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, July 1, 2008

SEC Files Backdating Charges Against Microtune and its former CEO and CFO/GC

The SEC filed civil fraud charges relating to backdating stock options against Microtune, Inc. and two former senior officers—former Chairman and Chief Executive Officer Douglas J. Bartek and former Chief Financial Officer and General Counsel Nancy Richardson. The SEC alleged that Bartek and Richardson perpetrated a fraudulent and deceptive stock option backdating scheme that awarded themselves and other employees millions of dollars in undisclosed compensation. The SEC's complaint, filed in the federal district court for the Northern District of Texas, alleges that Bartek, with assistance from Richardson, routinely backdated the date on which he granted stock options to senior executives and other employees. To conceal the scheme, as alleged, Bartek directed others to backdate employment records, including offer letters, to establish falsified start dates and grant dates that preceded the actual dates the new hires began working for Microtune.

The SEC's complaint further alleges that Bartek and Richardson caused Microtune to grant backdated options, cancel those options after the company's stock price dropped precipitously, and subsequently re-grant the same options at a substantially lower exercise price. According to the SEC's complaint, the re-grants were not, as required, accounted for using variable accounting, in part because, as alleged, Richardson and Bartek concealed the nature of the re-grants from Microtune's outside auditors and others.

Without admitting or denying the SEC's allegations, Microtune agreed to an permanent injunction. The SEC's litigated action against Bartek and Richardson seeks injunctive relief, disgorgement of wrongful profits, civil monetary penalties, officer and director bars, and reimbursement of profits from stock sales pursuant to Section 304 of the Sarbanes-Oxley Act of 2002

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