Fagel described stock-options backdating "just another fraud case," although he said the scandal also turned up some surprises for the agency.Members of the team, who have also worked with the U. Justice Department on backdating issues, declined to discuss specific cases or ongoing investigations."The accounting judgment made by Apple's accounting team ... "Unfortunately, the SEC got this case wrong," he said. In the Apple case, there was no 'there' there." Attorneys for Lisa Berry, another lawyer accused of fraud in connection with options backdating, have also questioned the legal basis of the SEC's allegations.was absolutely reasonable and defensible under the accounting literature that existed at the time," said Ehrlich, who previously served as a prosecutor for 11 years and was chief of the white-collar crime section of the U. Berry served as general counsel for KLA-Tencor Corp.and Juniper, and she allegedly played a critical role in options backdating schemes at both tech companies.The SEC says that -- in an apparent sign of how options backdating became almost standard practice in some companies -- Berry even left instructions with employees in the company's human resources department prior to her leaving KLA-Tencor on how to "carry on with the scheme after she had departed." Berry has denied the charges.When the issues first came up, Faglel said his team didn't exactly know what it was dealing with.The agency was alerted to the issue thanks to the work of academics, analysts and news organizations (particularly the Wall Street Journal, which first broke the story), who described how many companies appeared to be granting stock options at a time when their shares were trading low.
Fagel has led a team of about 30 attorneys, accountants and paralegals with the U. Securities and Exchange Commission office in San Francisco, who have combed through millions of e-mails and conducted dozens of interviews in a stock-options backdating scandal.
Fagel said the reports talked about "how unusually lucky a lot of companies seem be on the timing of their options grants." At first, the agency thought the scam involved classic insider trading, which occurs when company executives make trades based on knowledge about their company that has not yet become public.
But Fagel said the SEC eventually came to "an increasing realization that the companies were in fact lying about the timing of the grants." To prove their cases, the SEC combed through e-mails and documents and interviewed executives and rank-and-file employees at the various companies involved.
Their work is now seen as having shed more light on how many tech companies manipulated stock-option grants by filing false financial information and sometimes even doctoring or making up meeting minutes -- even as some other legal experts argue that the agency has overreached by mistaking record-keeping and administration glitches for fraud.
One of the investigation's first major cases ended this week when a federal judge in San Francisco sentenced ex-Brocade CEO Gregory Reyes to 21 months in prison and ordered him to pay a million fine. Reyes is the first CEO to be sentenced to jail time for his role in stock-options backdating.