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McAfee Marks $13.8 Mln to Settle Stock Case

McAfee Marks $13.8 Mln to Settle Stock Case

Antivirus and security vendor McAfee is one o more than 100 U.S. companies (including Apple and Dell) to have been investigated by the U.S. Securities and Exchange Commission in regard to option backdating, a practice whereby stock options granted to executives and employees are backdated in a way which makes the grant most advantageous to the employees. There’s nothing illegal about backdating, per se, so long as its impact on a company’s overall financial status is fully disclosed. The problem is that many companies didn’t seem to get that, with the result that the value of backdated options was not accurately reflected on company balance sheets. And that is (potentially) accounting fraud.

McAfee is hoping to put the backdating controversy behind it, announcing that it is restating a decade’s worth of earnings from 1995 through 2005, with a net impact on the company’s financials of $137.4 million. McAfee says the bulk of the charges come from 2004 and earlier, and the restatement also corrects other errors not related to stock option grants.

Earlier this year, McAfee chief counsel Kent Roberts was indicted on fraud charges related to the backdating options in 2000 and 2002.

McAfee is setting aside $13.8 million dollars to deal with a tentative settlement to shareholder lawsuits brought against the company over the options backdating. The company also says it is considering a share repurchase program, which, if implemented, may enable the company to raise its stock price.

McAfee has previously agreed to pay $50 million in penalties to settle accounting fraud charges with federal regulators; the company also parted ways with CEO George Samenuk in early 2006.

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Geoff Duncan
Former Digital Trends Contributor
Geoff Duncan writes, programs, edits, plays music, and delights in making software misbehave. He's probably the only member…
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