According to The Recorder, the regulator has accused Lisa Berry of misdating options at KLA, leaving instructions for other employees to do the same when she left the company and then spearheading a backdating scheme at Juniper. Berry’s is the first backdating case to allege a cross-pollination of companies with fraudulent practices, the news report said.
Regulators accused KLA and its chief executive Kenneth Schroeder in July in a backdating scheme, saying that the company vastly overstated its earnings and misled shareholders about its finances as part of its option backdating activities (See CA Semiconductor Firm, Ex-Exec, Named in SEC Backdating Case ).
At the same time KLA was charged, the SEC also commended the company for its “swift, extensive, and extraordinary cooperation,” and “significant remedial actions” after an internal investigation ended. However, the SEC did not give the same level of commendation to Berry, who it says personally backdated options grants at KLA from 1997 to 1999, and continued doing so when she left KLA to become general counsel at Juniper Networks Inc.
KLA and Juniper have both settled charges with the SEC.
One of the problems with Berry’s case is how to bring the abuses under a single charge. However, the SEC decided this summer to consider her behavior at both companies as a “single pattern of conduct,” according to the Recorder. This would mean her actions at KLA would fall under the five-year statute of limitations set for securities fraud to get monetary relief.
Lumping the charges together may mean she will have to pay monetary penalties for her malfeasance at both KLA and Juniper.
While at KLA, the SEC complaint alleges, Berry “directed the process for selecting the exercise price by using historical information regarding low KLA stock prices of the preceding weeks. One or more members of the stock option committee then executed the grant paperwork prepared at Berry’s direction, bearing false grant dates that had been selected using hindsight.”
According to the Recorder, Berryleft instructions for other employees on how to continue misdating the options.
Berry then recommended to Juniper’s board of directors create a three-member options committee. She reigned over the company’s stock option granting process and supervised Juniper’s stock administrator.
The SEC says that Berry “routinely created backdated ‘minutes’ for purported stock option committee meetings that never occurred.” She also “stamped the minutes with a signature stamp she maintained bearing the other stock option committee members’ signatures.”Berry’s lawyer, Melinda Haag, said she had no idea the companies violated options accounting, nor did she profit from the misdated options grants. However, the SEC said she “certainly benefited by increased value of the companies.”
More information on the SEC allegations is here .