SEC Charges Former General Counsel of KLA-Tencor And Juniper Networks For Fraudulent Stock Option Backdating
Juniper Settles Fraud Charges Brought by Commission
FOR IMMEDIATE RELEASE
Washington, D.C., August 28, 2007 - 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 action today confirms that attorneys are no less bound by the securities laws than other public company executives," said Linda Chatman Thomsen, the SEC's Director of Enforcement. "At both KLA and Juniper, Ms. Berry was in a unique position to insure that the companies accurately disclosed their stock option expenses; instead, she facilitated their fraud on investors."
Marc Fagel, Associate Regional Director of the Commission's San Francisco Regional Office, added, "By its use of hindsight to pick favorable grant dates, Juniper avoided reporting hundreds of millions of dollars of expenses to its shareholders. Juniper's internal controls failed to detect the problem, resulting in its repeated reporting of false financial information to the public."
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.
In its action against Berry, the Commission seeks a permanent injunction against violations of the antifraud, books and records, internal controls, reporting, and proxy provisions of the federal securities laws, disgorgement and interest, a civil penalty, and an order barring her from acting as an officer or director of a public company.
The Commission's settlement with Juniper, also filed in federal district court in San Jose, provides that Juniper will be enjoined from violating the antifraud, books and records, internal controls, reporting, and proxy provisions of the federal securities laws. In considering Juniper's settlement offer, the Commission took into account the cooperation that Juniper provided Commission staff during its investigation.
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For more information, contact:
Marc J. Fagel
Associate Regional Director
Cary S. Robnett
Assistant Regional Director
SEC's San Francisco Regional Office
Additional materials: Litigation Release No. 20257