“If you inherit a process that is improper, that does not exonerate you,” Fogel said. The agency charged the San Jose company with securities violations but chose not to file harsher fraud charges or levy financial penalties, citing KLA-Tencor’s cooperation with the government investigation and efforts to clean up the mess.
“Even if you made that argument, at some point he received an explicit legal opinion that it was improper and nonetheless continued it.” The action against Schroeder came as the SEC closed the book against KLA-Tencor, the second-largest U. That contrasts with previous cases against Silicon Valley companies Brocade Communications Systems and Mercury Interactive, which faced fraud charges and agreed to pay million and million in penalties, respectively.
Jen helps her clients hire top talent without getting into trouble, and to stop competitors and departing employees from stealing trade secrets.
The first criminal backdating trial, against former Brocade CEO Greg Reyes, is expected to go to the jury in the next few days.
Contact Mark Schwanhausser at [email protected] (408) 920-5543.
“All of his behavior is consistent with his belief that nothing was wrong.” And countering SEC claims that backdated options gave him a head start to profits worth “millions of dollars,” Schroeder said he did not exercise any tainted options granted to him as CEO, though he did pocket about $26,000 from mispriced options granted before he was promoted.
Marc Fogel, associate regional director for the SEC, challenges the defense that Schroeder inherited a flawed granting process.
Schroeder as the man who “engineered a scheme” to backdate options routinely, the Securities and Exchange Commission on Wednesday filed civil fraud charges accusing him of rigging options for himself and other employees during the tech boom.
As proof, the SEC cited a March 2001 e-mail in which Schroeder apparently berated the company’s top attorney for writing a memo that stated that granting discounted stock options would expose the company to accounting charges.
As a founding member of a special stock-option committee empowered by the board in 1997 to approve option grants, Schroeder helped approve hundreds of mispriced options granted to top executives, high-performers and new hires.
According to a June 1999 memo from an unidentified executive that instructed the human resources department how to backdate grants for new employees, the company compiled lists of new workers for several weeks, then gave the special committee a list of three or four of the lowest stock prices to pick from.
In October 2001, while Schroeder was CEO, one backdated grant created more than 5 million in potential paper profits for scores of employees.