SEC PREVAILS AT TRIAL IN OPTION BACKDATING CASE
The SEC prevailed on most counts of its option backdating case against the former CFO of Maxim Integrated Products, Inc., Carl W. Jasper. SEC v. Jasper, Case No. CV 07-6122 (N.D. CA. Filed Dec. 4, 2007). The Commission’s complaint alleged that over a five year period beginning in 2000 Mr. Jasper engaged in a scheme to illegally backdate stock options granted by the company to employees and directors. In order to provide those persons with in-the-money options the Commission claimed that the company routinely backdated the option grants to dates which corresponded to historical lows for Maxim’s stock price. Over a period of ten consecutive quarters beginning in the second quarter of 2002 grants were backdated to the lowers price of the quarter.
Mr. Jasper was aware that Maxim granted options on dates selected with hindsight. On repeated occasions, according to the complaint, Mr. Jasper prepared falsely dated option grant approval documents for the signature of the CEO. Those documents made it appear that the options had been grated at the market price on an earlier date. The company also failed to properly account for the options. Accordingly, the company overstated its income by millions of dollars.
The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a), 13(b)(1)(A), 13(b)(2)(B), 13(b)(5) and 14(a) and the related rules. It sought injunctive relief, disgorgement, a civil penalty and an officer/director bar.
Following an eight day trial the jury returned a verdict in favor of the Commission and against Mr. Jasper on the fraud, lying to the auditors and aiding Maxim’s failure to maintain accurate books and records claims. Mr. Jasper prevailed on the alleged proxy rule violations and certain other counts. The court will determine the remedies. See also Lit. Rel. 21507 (April 26, 2010).
Previously, the Commission brought an action against the company and its former CEO, John Gifford. SEC v. Maxim Integrated Products, Inc., Case No. C-07-6122 (N.D. CA. Filed Dec. 4, 2007). The company settled with the Commission as discussed here. Mr. Gifford, who had instructed Mr. Jasper to properly record the compensation, also settled with the Commission as discussed here. See also Lit. Rel. 20381 (Dec. 4, 2007).