U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20257 / August 28, 2007
SEC v. Lisa C. Berry, Case No. C 07-4431 RMW (N.D. Cal. filed August 28, 2007)
SEC v. Juniper Networks, Inc., Case No. C 07-4430 JW (N.D. Cal. filed August 28, 2007)
SEC Charges Former General Counsel of KLA-Tencor and Juniper Networks for Fraudulent Stock Options Backdating
Juniper Settles Fraud Charges Brought by Commission
The Securities and Exchange Commission today filed fraud charges against a Bay Area attorney for her role in illegally backdating stock option grants. The Commission charged Lisa C. Berry with routinely backdating option grants from 1997 to 2003, first as General Counsel of KLA-Tencor Corporation, and then as General Counsel of Juniper Networks, Inc. The Commission alleges that Berry's misconduct caused the two companies to conceal hundreds of millions of dollars in stock option compensation expenses relating to undisclosed in-the-money options provided to company executives and employees.
The Commission also announced today that it has filed a settled enforcement action against Juniper, an information technology company based in Sunnyvale, Calif. Without admitting or denying the allegations, Juniper has consented to a permanent injunction against violations of the antifraud and other provisions of the federal securities laws. KLA, a San Jose-based semiconductor equipment company, previously settled charges brought by the Commission.
The Commission's complaint against Berry, filed in federal district court in San Jose, Calif., alleges that she routinely used hindsight to identify dates with historically low stock prices, facilitating the backdating of option grants by KLA's stock option committee. According to the Commission, Berry then moved to Juniper shortly before its 1999 IPO, touting her experience in stock administration. The complaint alleges that Berry established a similar backdating process at Juniper, creating minutes of fictitious stock option committee meetings to document false grant dates — at times affixing the names of other committee members with a signature stamp.
According to the Commission's complaint, the backdated grants resulted in materially misleading disclosures, with KLA overstating its net income in fiscal years 1998 through 1999 by as much as 47 percent and Juniper overstating its 2003 net income by nearly 22 percent. In 2007, both KLA and Juniper restated their financial statements, with Juniper recording nearly $900 million in previously unreported compensation expenses.
Juniper, without admitting or denying the allegations in the Commission's complaint, agreed to settle the matter by consenting to a permanent injunction from further violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, and 14a-9 thereunder.
Berry is charged with violating Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder, and Berry is charged with aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13 and 14a-9 thereunder. The Commission is seeking injunctive relief, disgorgement of ill-gotten gains, and monetary penalties against Berry, in addition to an order barring her from serving as an officer or director of a public company.
For additional information, see Litigation Release No. 20207 (July 25, 2007).