Post by Sapphire Capital on Jul 12, 2008 23:11:37 GMT 4
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20638 / July 9, 2008
Accounting and Auditing Enforcement Release No. 2843 / July 9, 2008
Securities and Exchange Commission v. Sycamore Networks, Inc., Frances M. Jewels, Cheryl E. Kalinen, and Robin A. Friedman, United States District Court for the District of Massachusetts, Civil Action No. 1:08-CV-11166 (DPW)
SEC Charges Sycamore Networks and Three Former Officials in Options Backdating Case
The Securities and Exchange Commission today filed a settled civil enforcement action against Sycamore Networks, Inc., an optical networking company based in Chelmsford, Massachusetts, as well as its former Chief Financial Officer Frances M. Jewels, former Director of Financial Operations Cheryl E. Kalinen, and former Director of Human Resources Robin A. Friedman in connection with the backdating of stock options to employees over several years and the failure to disclose options-related expenses to the company's auditors and investors.
The Commission's complaint, filed in federal district court in Massachusetts, alleges that Sycamore's unreported options-related expenses during its fiscal years 2000 through 2005 totaled nearly $250 million. The Commission's complaint further alleges that Jewels and Kalinen repeatedly backdated options grants between October 1999 and July 2002 to prices at or near monthly or quarterly low points for the company's stock, providing employees with options with prices at which they could purchase shares that were lower than the market price at the time the options actually were granted. The Commission also alleges that Jewels and Kalinen falsified grant approval documentation and that they personally benefited from grants of below-market options.
The Commission's complaint describes an internal memorandum that outlines a plan to grant options at below-market prices to five company employees and keep the company's outside auditors from discovering these grants. The memo, drafted by Kalinen and provided to Jewels and Friedman, analyzed the risk that the company's outside auditors would uncover the conduct. Friedman participated in the plan by altering or creating, or causing others to alter or create, company personnel and payroll records so that they would reflect inaccurate start dates for the employees, according to the Commission's complaint.
All defendants have agreed to settle this matter, without admitting or denying the allegations in the Commission's complaint, on the following terms:
Jewels has consented to the entry of a permanent injunction prohibiting her from violating Section 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-9, and 16a-3 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Jewels will disgorge ill-gotten gains of $30,000 (plus prejudgment interest on that amount of $4,980.04), reimburse Sycamore (pursuant to Section 304 of the Sarbanes-Oxley Act of 2002) for $190,000 in cash bonuses she received during the period of the fraud, and pay a civil monetary penalty of $230,000. Jewels also will be barred from serving as an officer or director of any public company for a period of five years, and, in a related administrative proceeding, will be prohibited from appearing or practicing before the Commission as an attorney or accountant for a period of five years.
Kalinen has consented to the entry of a permanent injunction prohibiting her from violating Sections 10(b), 13(b)(5), and 14(a) of the Exchange Act and Rules 10b-5, 13b2-1, 13b2-2, and 14a-9 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Kalinen also will disgorge ill-gotten gains of $28,000 (plus prejudgment interest on that amount of $7,060.71) and pay a penalty of $150,000.
Friedman has consented to the entry of a permanent injunction prohibiting her from violating Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. Friedman also will pay a penalty of $40,000.
Sycamore has consented to the entry of a permanent injunction against future violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, and 14a-9 thereunder.
The settlement with Sycamore takes into account the company's cooperation during the Commission's investigation.
Litigation Release No. 20638 / July 9, 2008
Accounting and Auditing Enforcement Release No. 2843 / July 9, 2008
Securities and Exchange Commission v. Sycamore Networks, Inc., Frances M. Jewels, Cheryl E. Kalinen, and Robin A. Friedman, United States District Court for the District of Massachusetts, Civil Action No. 1:08-CV-11166 (DPW)
SEC Charges Sycamore Networks and Three Former Officials in Options Backdating Case
The Securities and Exchange Commission today filed a settled civil enforcement action against Sycamore Networks, Inc., an optical networking company based in Chelmsford, Massachusetts, as well as its former Chief Financial Officer Frances M. Jewels, former Director of Financial Operations Cheryl E. Kalinen, and former Director of Human Resources Robin A. Friedman in connection with the backdating of stock options to employees over several years and the failure to disclose options-related expenses to the company's auditors and investors.
The Commission's complaint, filed in federal district court in Massachusetts, alleges that Sycamore's unreported options-related expenses during its fiscal years 2000 through 2005 totaled nearly $250 million. The Commission's complaint further alleges that Jewels and Kalinen repeatedly backdated options grants between October 1999 and July 2002 to prices at or near monthly or quarterly low points for the company's stock, providing employees with options with prices at which they could purchase shares that were lower than the market price at the time the options actually were granted. The Commission also alleges that Jewels and Kalinen falsified grant approval documentation and that they personally benefited from grants of below-market options.
The Commission's complaint describes an internal memorandum that outlines a plan to grant options at below-market prices to five company employees and keep the company's outside auditors from discovering these grants. The memo, drafted by Kalinen and provided to Jewels and Friedman, analyzed the risk that the company's outside auditors would uncover the conduct. Friedman participated in the plan by altering or creating, or causing others to alter or create, company personnel and payroll records so that they would reflect inaccurate start dates for the employees, according to the Commission's complaint.
All defendants have agreed to settle this matter, without admitting or denying the allegations in the Commission's complaint, on the following terms:
Jewels has consented to the entry of a permanent injunction prohibiting her from violating Section 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-9, and 16a-3 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Jewels will disgorge ill-gotten gains of $30,000 (plus prejudgment interest on that amount of $4,980.04), reimburse Sycamore (pursuant to Section 304 of the Sarbanes-Oxley Act of 2002) for $190,000 in cash bonuses she received during the period of the fraud, and pay a civil monetary penalty of $230,000. Jewels also will be barred from serving as an officer or director of any public company for a period of five years, and, in a related administrative proceeding, will be prohibited from appearing or practicing before the Commission as an attorney or accountant for a period of five years.
Kalinen has consented to the entry of a permanent injunction prohibiting her from violating Sections 10(b), 13(b)(5), and 14(a) of the Exchange Act and Rules 10b-5, 13b2-1, 13b2-2, and 14a-9 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Kalinen also will disgorge ill-gotten gains of $28,000 (plus prejudgment interest on that amount of $7,060.71) and pay a penalty of $150,000.
Friedman has consented to the entry of a permanent injunction prohibiting her from violating Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. Friedman also will pay a penalty of $40,000.
Sycamore has consented to the entry of a permanent injunction against future violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, and 14a-9 thereunder.
The settlement with Sycamore takes into account the company's cooperation during the Commission's investigation.