The Teachers’ Retirement System of Louisiana said in its lawsuit that Siebel Systems’ board gave company founder, CEO and chairman Tom Siebel, millions of stock options at or below market prices, rather than at a premium, as company rules required. The suit also claims that Siebel was given, under certain circumstances, more options than allowed under the rules, according to Reuters.
Worse, the pension fund alleged in its complaint filed September 23 in San Mateo, California, that in order to cover their actions, Siebel directors “changed the grant date on the options, fabricated the reports, and rolled over the improper grants into the following year.”
According to published reports, Siebel Systems had issued so many employee options that by the end of 2001, they accounted for just over half of the company’s undiluted shares outstanding.
Siebel Systems said in a footnote to its annual report that it would have had a 2001 net loss of $467 million, or $1.02 per share, if it had been forced to expense options employees exercised. Instead, it reported a net profit of $255 million, or 49 cents per diluted share.
From 1996 through 2001, Tom Siebel received options valued at nearly $1 billion on the date of grants, the lawsuit said.
“The real source of wealth provided to Siebel, and the source of the waste that has cost the company well over a billion dollars, was in the form of option grants that the board of directors authorized to be paid to Siebel and to themselves,” the pension fund said in the suit. In addition, the suit alleges that certain Siebel Systems’ directors received millions of options. The firm did not disclose director option grants in 2000 and 2001.
Defendants in the lawsuit include Tom Siebel and Patricia House, Siebel Systems’ co-founder and vice chairman, as well as the firm’s entire board of directors.
A Siebel Systems spokeswoman said a similar case had been brought against the company and summarily dismissed in 2000. She said the name of the plaintiff in that case was not immediately available, according to Reuters, which noted that she declined to comment further.
The pension fund said it will continue to hold Siebel Systems shares during the duration of its legal action against the company – and that looks to be a while. As it stands at present, the parties to the lawsuit are not slated to appear for their first conference until January 9.
Siebel Systems’ stock, a tech-boom star, traded at nearly $120/share just two years ago. Friday the stock closed at $6.81/share.