Washington, D.C., Feb. 28, 2007 – LAWFUEL – Corporate Law – The Securities and Exchange Commission today charged Kent H. Roberts, the former General Counsel and Corporate Secretary of McAfee, Inc., with securities fraud for wrongfully re-pricing McAfee stock option grants awarded to him and others in an effort to secretly increase the value of the grants. The Commission’s complaint alleges that Roberts, secretly and without authorization, changed the grant date of a February 2000 grant made to him in order to take advantage of McAfee’s then-declining stock price, which increased the potential value of his option grant by approximately $197,500. Roberts concealed his fraudulent re-pricing by filing false stock ownership reports with the Commission, and by failing to properly disclose in a McAfee proxy statement, which he signed, that the grant had been illicitly re-priced to confer a potential benefit of approximately $197,500 on Roberts.
The complaint also alleges that in 2002, Roberts, in his capacity as secretary of the compensation committee of McAfee’s board of directors, falsified the minutes of a compensation committee meeting, and directed the company to issue a 420,000 share option grant to McAfee’s chief executive a day later than the committee had directed. By re-dating the grant to a day after the committee’s intended grant date, Roberts gave the chief executive a potential benefit of approximately $739,200, due to an intervening decline in McAfee’s stock price. Roberts later signed a company proxy statement that misleadingly described the chief executive’s option grants, and failed to disclose that the CEO had received an extra $739,200 of potential value due to the unauthorized re-pricing.
Roberts was terminated from his positions at McAfee, Inc. in May 2006, after he confessed his option re-pricing to members of McAfee’s board of directors. Roberts did so as McAfee was conducting an internal investigation into option granting practices.
Linda Chatman Thomsen, Director of the Commission’s Division of Enforcement, said, “Roberts flouted his duties as McAfee’s general counsel by subverting the very systems that he was charged with safeguarding to improperly benefit himself and others. This action further demonstrates the Commission’s resolve to stem fraudulent conduct by legal officers of public companies.”
Roberts is charged with violating the antifraud provisions of the Securities Exchange Act of 1934, with violating prohibitions on circumventing internal controls, and with violating provisions and rules of the Exchange Act regarding disclosures of stock ownership by public company officers. He is also charged with aiding and abetting proxy statement disclosure violations by McAfee. The Commission is seeking injunctive relief, disgorgement, and money penalties against Roberts, in addition to a permanent bar to prohibit Roberts from serving as an officer or director of a public company.
The Commission acknowledges the assistance of the United States Attorney’s Office for the Northern District of California, which conducted its own separate, parallel investigation.
The Commission’s investigation in this matter is continuing.