Friday, March 13, 2009
The SEC settled stock option backdating chargs with software manufacturer Quest Software, Inc. and three current or former officers. According to the SEC's complaint, Quest, its executive chairman Vincent Smith, its former chief financial officer John Laskey, and former controller and principal accounting officer Kevin Brooks improperly granted undisclosed in-the-money stock options to executives and employees by backdating millions of options from 1999 through 2002. As a result of this misconduct, Quest reported a $113.6 million restatement of its operating income in September 2007. Quest has agreed to settle the SEC's charges, and the three executives have agreed to pay more than $300,000 combined to settle the allegations against them. The SEC further alleges that Quest backdated 28 separate grants involving more than 11 million shares of common stock. Quest's failure to properly record compensation expenses in connection with the backdated options resulted in the overstatement of Quest's operating income by 4 percent to 963.1 percent and the understatement of its operating loss by 26.12 percent to 154 percent from 1999 through 2005.