Former Mercury CFO Charged with Tax Evasion from Backdating Scheme

April 24, 2008 ( - The former chief financial officer of Mercury Interactive Corp. was charged Tuesday with evading taxes and helping two other executives falsify their tax returns to conceal stock-options backdating.

The San Francisco Chronicle reports that prosecutors said Sharlene Abrams, who supervised the exercise of stock options for Mercury’s officers and executives, orchestrated a scheme to falsify the dates on which stock options were exercised in order to reduce their apparent value and minimize tax liability. The indictment accuses Abrams of doing so for former chairman and CEO Ammon Landan and former chief operating officer Kenneth Klein as well as for herself.

The charges cover stock options exercised in April, May, and August 2001, prosecutors said, according to the Chronicle.

The Securities and Exchange Commission filed a civil suit in June against Abrams and three other former Mercury officials – Landan; Douglas Smith, another former CFO; and Susan Skaer, former general counsel – accusing them of concealing the backdating of their own stock-option grants and helping the company hide backdating transactions.

Mercury paid a $28 million settlement to the SEC in May (See Mercury Makes $35M Settlement Offer for Options Backdating Fraud ). In October, Hewlett-Packard, which acquired Mercury in 2006, paid $117.5 million to settle a class-action suit over the alleged backdating.

In Mercury’s internal investigation, the company found 54 instances of stock options backdating starting as far back as 1994 (See Mercury Internal Probe Uncovers 54 Stock Options Backdating Instances ).