Emails Between General Counsel and CEO Form the Basis for Securities Fraud Claim

When you read the the Compliant filed in SEC v. Roberts (former GC of McAfee), one can readily appreciate why regulators, prosecutors, and litigants in general will continue to demand and fight for production of email from corporations. Here is an excerpt from the Complaint to give a flavor of what the SEC found in these emails dating back to 2002. No charges have been brought against former the CEO of McAfee.

“Roberts Wrongly Re-Priced and Re-Dated a 420,000-Share Option Grant to McAfee’s CEO
19. McAfee’s Compensation Committee met on January 15,2002, and approved a grant of an option to purchase 420,000 shares of McAfee common stock to the CEO. The same day, Roberts sent an email to the CEO and McAfee’s Senior Vice President of Human Resources indicating that the Board had made certain changes to the CEO’s compensation for 2002. Roberts wrote in part: “[The CEO] has been granted a 420,000 share stock option at today’s closing price of $27.19 which vests on January 15, 2005 (1 00% vesting on that date)[.]”

20. On the following day, January 16, after the market had closed, Roberts sent a second email to the CEO and McAfee’s Senior Vice President of Human Resources in which he stated: “Let’s price the 420,000 option shares at today’s closing price of $25.43.”

21. A week later, on January 23,2002, the CEO wrote in an email to Roberts and McAfee’s Senior Vice President of Human Resources: “On January 16 it appears that the stock price finished at $25.43 . . . is this the price that the new options will be set at?? Is that the low for those days after the Board Meeting??’Roberts replied on the same day: “The close on Jan 16 is the right price.”

22. Roberts prepared the minutes from the January 15,2002 Compensation Committee meeting. The minutes falsely state: “The Committee directed that [the CEO] be granted an additional stock option for 420,000 shares on January 16,2002, at the closing price on that date.”
23. Roberts was not authorized to unilaterally change the grant date or exercise price for the CEO’s option grant. Pursuant to McAfee7s shareholder approved stock option plan, Roberts’ changes to the grant date required the approval of McAfee’s Compensation Committee. The Compensation Committee was never told about, and did not approve, Roberts’ decision to re-price this option grant.

24. On December 29,2006, McAfee filed with the Commission a Current Report on Form 8-K in which it disclosed that it had revisedthe grant date for this option to January 15,2002, “the date on which Compensation Committee approval was obtained,” and, in turn, increased the option’s exercise price to $27.19 per share, the closing price of McAfee’s stock on January 15,2002.

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