The Securities and Exchange Commission charged network security company Blue Coat Systems and its former CFO, Robert P. Verheecke, with allegedly backdating stock option grants and reporting false financial information, and he has settled the charges for $185,000.
The SEC complaint alleges that from approximately 2000 through 2005, the Sunnyvale, Calif.-based company concealed nearly $50 million in compensation expenses associated with "in-the-money" options by backdating paperwork to make it appear as if the options had been granted on earlier dates.
Blue Coat and Verheecke have agreed to settle the SEC's charges without admitting or denying the allegations. Verheecke agreed to a five-year ban from serving as an officer or director of a public company and appearing or practicing as an accountant before the SEC.
The SEC's complaint, filed in federal court in San Jose, alleges that Blue Coat regularly used hindsight to select favorable exercise prices for employee and officer stock option grants without accurately reporting the grants to investors. In March 2007, after an internal investigation, Blue Coat corrected its financial statements for fiscal years 2000 through 2005, recording nearly $50 million in additional expenses for misdated options. The majority of the expenses related to grants prior to May 2001.
Verheecke served as CFO from May 2001 through May 2005. The SEC alleges that he personally exercised backdated options for $30,000 in excess profits.
"We are pleased to conclude this matter with the SEC and to continue our focus on execution and serving the needs of our customers," said Blue Coat president and CEO Brian NeSmith in a statement.
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