The former CFO of optical networking company Sycamore Networks, along with an ex-director of financial operations and another former executive, will pay more than $650,000 to settle Securities and Exchange Commission charges that they helped backdate stock options from 1999 to 2002.
According to the SEC, former finance chief Frances M. Jewels and former financial operations director Cheryl E. Kalinen repeatedly backdated option grants to prices at or near monthly quarterly lows during the three-year period.
The SEC alleges that Jewels and Kalinen fraudulently backdated options grants in order to give five employees favorable prices. They also personally benefiting from the below-market options. A third former executive, one-time human resources Robin A. Friedman was charged with misleading the Chelmsford, Mass.-based company’s auditors in the scheme.
In the complaint, filed in the U.S. District Court in Boston, the SEC alleges that Kalinen outlined the plan in an internal memo to Jewels and Friedman. The memo divulged how they would grant the below-market options to five employees, and conceal the grants from auditors. They also analyzed the chances they would get caught.
Without admitting or denying guilt, the three former executives settled all charges.
Jewels will pay a penalty of $230,000 and reimburse the company $190,000 for the cash bonuses she received during the time the fraud took place. She will also disgorge all ill-gotten gains from the sale of $30,000 of Sycamore stock and pay prejudgment interest on the disgorgement, and she will be prohibited from serving as an officer or director of a public company for five years or appearing or practicing as an attorney or accountant before the SEC for five years after that.
Kalinen will pay $150,000, plus disgorgement of ill-gotten gains of $28,000 plus prejudgment interest and Friedman will pay $40,000 and will be prohibited from appearing or practicing as an attorney before the Commission for two years.
Jewels’s attorney, Michael Gardener of Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo, told CFO.com: “After three years, the SEC has agreed to resolve this matter without any admission of liability by Ms. Jewels. She is pleased to have this behind her without any need for litigation.”