Two More Option Backdating Cases
The Commission continued to work through its inventory of option backdating, filing two additional cases, both based on events at Embarcadero Technologies, Inc. SEC v. Wong, Case No. CV 08 4239 (N.D. Cal. Sept. 9, 2008); SEC v. Sabhlok, Case No. CV 08 4238 (N.D. Cal. Sept. 9, 2008). Named as defendants were Stephen Wong, former CEO, president and chairman, Raj Sabhlok, former CFO and Michael Pattison, former controller of the company. Only Mr. Wong settled with the Commission.
According to the SEC’s complaints, Embarcadero routinely backdated stock option grants over a period of sixteen consecutive quarters. During that period hundreds of in-the-money grants were made. Approximately $1.5 million worth of those grants were issued to the three defendants. Embarcadero did not properly record the expenses for any of these grants. Rather, each of the defendants helped cover up the backdated options by falsifying the records of the company.
To resolve his case, Mr. Wong consented to the entry of a permanent injunction prohibiting future violations of the antifraud, reporting and proxy provisions of the federal securities laws. In addition, he agreed to pay a $250,000 civil penalty.
The remaining two defendants, Messrs. Sabhlok and Pattison, are alleged to have violated the antifraud, proxy and reporting provisions of the securities laws. That case is in litigation.