Network security firm, ex-CFO charged over backdating options

13 November 2008

A California-based network security firm and its ex-chief financial officer have been charged with illegally backdating stock options to avoid compensation expenses and providing investors with false financial reports.

Between 2000 and 2005, Blue Coat Systems concealed approximately $50 million in expenses linked to "in-the-money" options by altering its paperwork to give the impression that its option grants were issued on dates when stock prices were historically low, the Securities and Exchange Commission alleges.

Robert Verheecke, who was the company's CFO between May 2001 and May 2005, failed to "ensure the integrity" of these statements and his actions led to the company reporting inflated results to investors and providing independent auditors with false information, the regulator added.

Both the company and Mr Verheecke have agreed to settle the case without admitting or denying the allegations against them.

Sanctions imposed on the ex-CFO include a fine of $150,000 plus prejudgment interest of $35,946 and a five-year ban on serving as an officer or director of a public company.

Blue Coat's initial public offering was completed in November 1999.

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