October 10, 2007
Former CFO Pleads Guilty for Options Backdating
The former chief financial officer at data encryption software company SafeNet Inc. pleaded guilty to one count of securities fraud for her role in options backdating at the company, which was taken private in April 2007. She was indicted in July 2007, and on August 1 the SEC filed a civil enforcement action against her. According to the SEC Litigation Release (here):
Argo was aware that SafeNet routinely granted in-the-money options, and she knowingly or recklessly failed to cause SafeNet to record compensation expense as required by Generally Accepted Accounting Principles ("GAAP"). Consequently, SafeNet reported materially misstated financial results for periods beginning in late-2000 through early-2006. The complaint further alleges that Argo regularly prepared, reviewed and/or signed proxy statements, periodic reports and registration statements that she knew, or was reckless in not knowing, contained materially false and misleading statements and omissions concerning SafeNet's financial condition and options granting practices.
In October 2006, SafeNet announced that both the CFO and its chairman and CEO resigned from their positions because of the options backdating at the company (see 8-K here). To this point, the CEO has not been charged nor has the SEC filed an action against him. The CFO's plea agreement and likely cooperation may well lead to charges against the CEO in the near future. In the options backdating cases, the government has looked at the top in pursuing its investigations. (ph)
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the key statement being "or RECKLESSLY failed to cause SafeNet to record compensation expense"
So in other words the fact that there was no criminal intent on the part of this trumped up "crime" which has broken many companies and innocent people is finally being acknowledged? How about we all acknowledge that lawyers in the 70s implemented these plans this way and nothing ever changed, and those original implementers are all dead, and this new generation of executives was completely unaware of any issues with this particularly in the 2000-2001 period? The entire claim for damages the feds are claiming is less than the lawyer fees for these cases. How about we pay a fine and move on?
Posted by: Smort4 | Oct 11, 2007 5:59:12 PM