McAfee's Former Top Lawyer Charged with Stock Tampering

McAfee Inc.'s former top lawyer was charged Tuesday with stock options tampering that muddied the finances of the computer security software maker.

A federal grand jury indicted Kent Roberts nine months after Santa Clara-based McAfee fired him as its general counsel for "improper" handling of stock options issued in 2000. Roberts' attorney, Stephen Neal, was traveling Tuesday and unavailable for immediate comment.

The indictment includes seven criminal counts of fraud, alleging Roberts deceived investors by filing false statements with the Securities and Exchange Commission and falsifying McAfee's books.

Besides shedding more light on Roberts' alleged misconduct, the case provides the latest indication that the government crackdown on corporate America's widespread stock option abuses is progressing beyond the evidence-gathering stage, as prosecutors conclude which transgressions were egregious enough to merit criminal charges.

Roberts becomes the third former executive in the past two weeks to be accused of illegally rigging stock options, joining the former CEO of video game maker Take-Two Interactive Software Inc. and a former senior vice president for the company that owns the online job search site

The latest batch of stock options cases represent the first since last summer, when federal prosecutors charged five former executives at Brocade Communications Systems Inc. and Comverse Technology Inc. with a variety of felonies.

Other stock options cases appear to be looming. Citing unnamed sources familiar with the matter, The Wall Street Journal this month reported prosecutors are targeting former executives at Apple Inc., KLA-Tencor Corp. and Broadcom Corp. All companies have already acknowledged internal stock option shenanigans.

The government's investigation, spanning more than 100 companies nationwide, is primarily focused on the practice of "backdating" stock options. Under this scheme, company insiders retroactively pick an ebb in the stock price to determine an option's value, maximizing the potential windfall for the award's recipient.

Backdating isn't necessarily illegal, as long as it's properly disclosed and recorded on the books -- a requirement that dozens of companies like McAfee shirked. As they sift through the backdating morass, the Justice Department, SEC and state prosecutors in New York have been trying to separate the instances of ignorant bungling from those involving calculated malfeasance.


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