An SEC press release said Sycamore’s former Chief Financial Officer Frances M. Jewels and former Director of Financial Operations Cheryl E. Kalinen were charged with fraudulently backdating options grants to obtain more favorable options prices for employees. The agency accused them of misleading the company’s investors and auditors about the practice, not disclosing its consequent expenses in Sycamore’s financial statements, and personally benefiting from grants of below-market options.
The SEC also charged Sycamore’s former Director of Human Resources Robin A. Friedman with helping to mislead Sycamore’s auditors, according to the press release.
The company and the former executives, without admitting any wrongdoing, agreed to settle the SEC’s charges. Jewels is to pay a total of more than $450,000, made up of a penalty of $230,000; reimbursement to the company of $190,000 in cash bonuses she received during the period of the fraud; and disgorgement of ill-gotten gains from the sale of Sycamore stock of $30,000, plus prejudgment interest on the disgorgement. Jewels also agreed to be barred from serving as an officer or director of a public company for five years.
Kalinen is to pay a penalty of $150,000, plus disgorgement of ill-gotten gains of $28,000 plus prejudgment interest. Friedman is to pay a penalty of $40,000 and will be prohibited from appearing or practicing as an attorney before the Commission for two years in a related administrative proceeding.
Sycamore consented to an injunction against several securities law violations, including the antifraud provisions. The SEC said the settlement with Sycamore takes into account the company’s cooperation during its investigation.
In July 2006, the SEC was provided with a company memo that proved stock option grants were being manipulated at Sycamore (See Company Memo Shows Manipulation of Stock Option Dates ).