We suspected there might be some late filing gifts put under the SEC tree Friday afternoon that might escape notice before a long holiday weekend , and we were right.
McAfee released restated results – a process the company is all too familiar with — this time, to account for past errors in the way it granted and accounted for stock options. Bottom line: an additional $137.4 million in non-cash stock based compensation charges for the years 1995 through 2005.
As with many of the other reports from special committees at other companies looking into possible backdating, the language used by McAfee’s board is priceless. Here are some examples of what the committee had to say about certain “qualitative concerns” it had relating to its historical “stock option granting process” in its 10-K filing Friday.
“In some instances,” the board writes “former members of management
drafted corporate records, including employment documentation, board and compensation committee meeting minutes and actions by unanimous written consent, with the benefit of hindsight so as to choose measurement dates giving more favorable exercise prices, moreover, certain of these documents were used by us in making accounting determinations with respect to stock-based compensation.”
(So, let’s get this straight: the board relied on committee meeting minutes and
written-consent documents about its own actions that were incorrect, but they didn’t realize it at the time?)
And this: “during the course of the investigation, certain former members of
management did not provide completely accurate or consistent information and in one case, provided documentation to the special committee that the special committee determined was intentionally altered;”
So you’re saying they lied, right?
Or this: “certain former members of senior management did not display the
appropriate oversight and ‘tone at the top’ expected by the board of directors.”
Tone at the top? Since when is telling the truth and following the rules considered “tone”?
McAfee also announced Friday it has set aside $13.8 million to go toward “a tentative settlement with the plaintiffs in the pending federal and state derivative securities lawsuits related to historical stock option practices.”
The company hasn’t totaled up the cost from its own investigation into this matter, but calls the amount “material”. It has also “incurred costs related to litigation, the investigation by the SEC, the grand jury subpoena from the U.S. Attorney’s Office for the Northern District of California and the preparation and review of our restated consolidated financial statements.” But wait, there’s more: “We expect that we will continue to incur costs associated with these matters and that we may be subject to certain fines and/or penalties resulting from the findings of the investigation.”
Not-so-happy new year.
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McAfee, the Santa Clara security software developer whose former top lawyer was acquitted earlier this month of of illegally tampering with his stock option grants to boost his pay package, filed a 15-page, 4,100-word document Friday outlining proposed steps it will take to improve its corporate governance. The plan is part of a proposed settlement of pending lawsuits filed related to the company’s historical stock option practices.
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