July 27, 2007
Former SafeNet CFO Indicted for Options Backdating
The former CFO of computer security company SafeNet, Inc., who also served as its president for two years, was charged in the Southern District of New York with one count of conspiracy and one count of securities fraud for her role in backdating options (indictment below). The case is one of a growing roster of prosecutions of senior corporate officers charged with crimes related to the issuance of backdated options, and in most instances they allegedly profited personally from the awards in which the dates were picked to increase the value of the securities by lowering the strike price of the options. According to a press release issued by the U.S. Attorney's Office (here):
ARGO and her co-conspirators routinely backdated options grants by papering them as if they had been issued on select historical "grant dates" when SafeNet's stock price had closed at or near a periodic low point. With the benefit of hindsight, ARGO created an opportunity for herself and others at SafeNet to reap substantial benefits by awarding herself and others backdated options grants with particularly advantageous exercise prices. As a result, a substantial number of SafeNetâs options grants during this time period were in-the-money on the day they were granted and therefore had an immediate compensatory and expense component and value to the recipient.
The indictment does not name any other individual conspirators, and further charges may be filed in the case, particularly if there are cooperating witnesses who have agreed to plead guilty and testify for the prosecution in the case. SafeNet was taken private in April 2007. (ph)
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