McAfee Terminates GC Over Backdating Scandal
Backdating of options is the new trend in white-collar scandal. In March, The Wall Street Journal began running a series of articles on stock-option backdating, a practice where executive stock-options are artificially dated at a time shortly before an upsurge in share prices to inflate their value. These articles attracted...
June 02, 2006 at 07:45 AM
2 minute read
The original version of this story was published on Law.com
Backdating of options is the new trend in white-collar scandal.
In March, The Wall Street Journal began running a series of articles on stock-option backdating, a practice where executive stock-options are artificially dated at a time shortly before an upsurge in share prices to inflate their value. These articles attracted the attention of the SEC, the DOJ and the IRS, all of which have since begun conducting investigations into the matter. In all, around 20 companies are currently being investigated.
The most recent causality of the backdating scandals is Kent Roberts, GC of McAfee Inc., the California-based antivirus software provider. On May 27, the company announced that it had fired Roberts for “one episode … in 2000 that was improper” regarding grants of employee stock options, according to a company press release. Roberts had served as McAfee's general counsel for five years.
In the meantime, the software maker will continue to conduct its own internal investigation into the stock-options matter.
“The audit committee is continuing the review of other option granting practices and has retained independent counsel to assist it in that effort,” the company said.
Though not illegal, under SOX, if a company does not disclose that it backdated options for financial gain, it could be held on charges of fraud and forced to restate its financials. The practice also opens a company up to shareholder lawsuits, according to news reports.
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