class=”byline”>A press release from U.S. Attorney Scott Schools of the U.S. District Court for the Northern District of California said Kent Roberts, 50, ofDallas, Texas, was charged in a seven-count indictment with fraudulently granting himself and others valuable in-the-money stock options.
class=”byline”>In a separate action, the U.S. Securities and Exchange Commission (SEC) charged Roberts with securities fraud in connection with the options pricing scheme.
class=”byline”>At the same time as he was carrying out the backdating plan, Roberts hid the nature and value of the option grants from Network Associates, its Board, its shareholders, its auditors, the public, and the SEC in 2000 and 2002, the charges asserted. Network Associates was the predecessor corporation to McAfee.
With the latest allegations, Roberts becomes the firstSilicon Valley lawyer charged in the stock options backdating debacle.
According to Schools, Roberts fraudulently granted himself extra compensation starting in 2000 by causing the date for his stock option grant to be changed so that the exercise price of the grant would be lower and so that it would appear that the grant was made on the new fabricated date.
The indictment said the Board of Directors for Network Associates granted Roberts the option to buy 20,000 shares of Network Associates’ stock at the strike price of $29.62, the closing value on February 14, 2000.
Concerned in late 2000 that the $29.62 exercise price of the grant was more than the market price for Network Associates' stock, Roberts allegedly caused Network Associates' then-controller to change the grant date and exercise price in the computer system that recorded stock option grants for employees. The indictment charged that Roberts caused the grant date to be changed to April 14, 2000, with a new exercise price of $19.75. According to the SEC, the move increased the potential value of Roberts' option grant by approximately $197,500.
The indictment further charges that Roberts fraudulently concealed the change made to his February 2000 stock option grant.
Roberts was also charged with making a false entry in board meeting minutes that purported to reflect a grant date for a stock option grant to then-CEO and chairman of Network Associates George Samenuk when the closing price of Network Associates' stock was relatively low, when in fact the board did not intend to make the grant effective on that date.
Specifically, on January 15, 2002, the Compensation Committee for the Board met and granted the then-CEO the option to purchase 420,000 shares of Network Associates' stock at the closing price on January 15, which was $27.19.
On the following day, according to the charges, Roberts decided to price the then-CEO's stock option grant at the closing price on January 16, 2002, which was $25.43. Roberts then allegedly prepared minutes of the January 15, 2002 meeting to falsely reflect that the board intended for the options to be granted at the closing price on January 16, 2002. The SEC said the move increased the potential value of Samenuk's options by $739,200.
According to the indictment, Network Associates' public
filings represented that it accounted for its stock option
grants in accordance with generally accepted accounting
The prosecutor's news release said Roberts joined Network Associates in May 1998 and became the General Counsel and Secretary of Network Associates in 2001. Roberts was also Network Associates' corporate compliance officer regarding SEC reporting rules, and in 2002 became one of the three founding members of the Ethics First Committee, which was charged with investigating any fraudulent conduct reported by employees.
Roberts is charged with two counts of mail fraud, one count of wire fraud, three counts of making false SEC filings, and one count of falsifying books, records, and accounts of Network Associates.
In May 2006, Network Associates' finance department discovered the fraudulent change to Roberts' February 2000 promotion grant and Roberts was terminated effective May 30, 2006 (See McAfee Hit with Options Scandal Upheaval ).
Last year, William Sorin, the general counsel of Comverse, was charged with securities fraud in New York; he later pleaded guilty (See Comverse Former General Counsel Pleads Guilty ).
Roberts is the third former executive in the past two weeks to be accused of illegally rigging stock options, joining the former CEO of video game maker Take-Two Interactive Software Inc.(See Video Game Maker Reveals Backdated Options ) and a former senior vice president for Monster Worldwide (See Monster Exec Pleads Guilty to Backdating Charges ).