Securities Law Prof Blog

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

Monday, September 29, 2008

Former SafeNet Officer Consents to Backdating Judgment

The United States District Court for the District of Columbia entered a Final Judgment of permanent injunction and other relief, including a ten year officer and director bar, against Carole Argo ("Argo"), the former president, Chief Financial Officer and Chief Operating Officer of SafeNet, Inc. ("SafeNet"). Without admitting or denying the Commission's allegations, Argo consented to the entry of the Final Judgment. The judgment settles the Commission's claims against Argo in a civil action filed on August 1, 2007, in which the Commission alleged that Argo engaged in a fraudulent scheme to backdate option grants while she was an officer of SafeNet.  The Commission's complaint alleged that Argo was aware that SafeNet routinely granted in-the-money options, and she knowingly or recklessly failed to cause SafeNet to record a compensation expense as required by Generally Accepted Accounting Principles. 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.

The Final Judgment orders Argo to pay a civil penalty of $50,000 (which will be offset by any payment Argo makes toward the $1,000,000 fine that was imposed upon her in a parallel criminal prosecution).

As part of the settlement, the Commission today issued an administrative order, pursuant to Rule 102(e)(3) of the Commission's Rules of Practice, suspending Argo from appearing or practicing before the Commission as an accountant. Argo consented to the issuance of the order, without admitting or denying the Commission's findings

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