U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22646 / March 15, 2013
Securities and Exchange Commission v. Mercury Interactive, LLC (f/k/a Mercury Interactive Corporation), Amnon Landan, Sharlene Abrams, Douglas Smith, and Susan Skaer, Civil Action No. 07-2822 (WHA) (N.D. Cal., filed May 31, 2007)
FORMER MERCURY INTERACTIVE GENERAL COUNSEL SETTLES SUIT ALLEGING STOCK OPTIONS BACKDATING AND OTHER MISCONDUCT Susan Skaer, former General Counsel of Mercury Interactive Corporation, to be Permanently Enjoined and to Pay Civil Penalties and Disgorgement, and to be Barred from Practicing or Appearing as an Attorney Before the Commission
The Securities and Exchange Commission today settled civil fraud charges against Susan Skaer, the former General Counsel and Secretary of Mercury Interactive Corporation (Mercury), arising from an alleged scheme to backdate stock option grants and from other alleged misconduct.
On May 31, 2007, the Commission charged three other former senior Mercury officers and Skaer with perpetrating a scheme from 1997 to 2005 to award Mercury executives and other employees undisclosed, secret compensation by backdating stock option grants and failing to record hundreds of millions of dollars of compensation expense. The Commission's Complaint also alleged other misconduct by Skaer related to the award of stock options to Mercury executives and employees.
Without admitting or denying the allegations in the Commission's complaint, Skaer consented to the entry of a final judgment permanently enjoining her from violating and/or aiding and abetting violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as well as the financial reporting, record-keeping, internal controls, false statements to auditors, and proxy provisions of the federal securities laws. Skaer will pay $628,037 in disgorgement and prejudgment interest, representing the "in-the-money" benefit from her exercise of backdated option grants, and a $225,000 civil penalty. The settlement is subject to the approval of the United States District Court for the Northern District of California.
As part of the settlement, and following the entry of the proposed final judgment, Skaer, without admitting or denying the Commission's findings, has consented to the entry of a Commission order, pursuant to Rule 102(e)(3) of the Commission's Rules of Practice, suspending her from appearing or practicing before the Commission as an attorney.
The settlement with Skaer, if approved, will conclude the litigation. The Commission previously filed settled charges against Mercury and three former outside directors of Mercury. On May 31, 2007, the Commission filed civil fraud charges against Mercury based on the stock option backdating scheme and other fraudulent conduct noted above. Mercury, which was acquired by Hewlett-Packard Company on November 8, 2006, after the alleged misconduct, settled the matter by agreeing to pay a $28 million penalty and to be permanently enjoined. See Litigation Release No. 20136 (May 31, 2007). On September 17, 2008, in a separate action, the Commission filed settled charges against three former outside directors of Mercury alleging that they recklessly approved backdated stock option grants and reviewed and signed public filings that contained materially false and misleading disclosures about the company's stock option grants and company expenses. The outside directors settled the matter by consenting to permanent injunctions and the payment by each director of a $100,000 penalty. See Litigation Release No. 20724 (Sept. 17, 2008). Mercury and the outside directors settled the charges without admitting or denying the allegations in the Commission's complaint. The Commission also previously settled with three of the four senior officers in its contested action. On March 20, 2009, the Commission settled with former Mercury CFO Sharlene Abrams by which she agreed to entry of a permanent injunction against the antifraud and certain other securities law provisions, to pay $2,287,914 in disgorgement which was deemed partially satisfied by payment to Mercury, to pay a $425,000 civil penalty, to be permanently barred from serving as an officer and director of any public company, and to a Commission order barring her from appearing or practicing before the Commission as an accountant. See Litigation Release No. 20964 (March 20, 2009). On February 21, 2013, the Commission settled with former Mercury CEO Amnon Landan and former Mercury CFO Douglas Smith. Landan agreed to entry of a permanent injunction against the antifraud and certain other securities law provisions, to pay $1,252,822 in disgorgement and prejudgment interest, to pay a $1,000,000 civil penalty, to be barred from serving as an officer and director of any public company for five years, and to reimburse Mercury, pursuant to Section 304 of the Sarbanes-Oxley Act, $5,064,678 for cash bonuses and profits from the sale of Mercury stock. Smith agreed to a permanent injunction against future violations of certain of the antifraud provisions, to pay $451,200 in disgorgement satisfied by a prior repayment to Mercury, to pay a $100,000 civil penalty, and to reimburse Mercury, pursuant to Section 304 of the Sarbanes-Oxley Act, $2,814,687 for profits received from the sale of Mercury stock, all but $250,000 of which was deemed satisfied by prior cash repayments and foregoing of rights to exercise vested options to the benefit of Mercury. See Litigation Release No. 22623 (Feb. 21, 2013). Landan, Abrams and Smith each settled without admitting or denying the allegations in the Commission's complaint.