Former Juniper attorney faces SEC's wrath
Juniper out of the bush but Berry gets the squeeze
Juniper Networks has settled with the US Securities and Exchange Commission (SEC) over allegations of improper stock option backdating. But while the networking equipment maker swims out of hot water, its former legal counsel is getting a double dip in the stew pot.
The SEC filed fraud charges yesterday against Bay Area attorney Lisa Berry for her role in the backdating options while at Juniper and at KLA-Tencor Corporation.
The Commission's complaint against Berry, filed in federal district court in San Jose, accuses her serial backdating. While at KLA, she allegedly identified dates with historically low stock prices to facilitate the backdating of option grants by the companies option committee. Berry moved to Juniper shortly before its 1999 IPO. At Juniper, the SEC claims, she established a similar backdating process, creating minutes of fictitious stock option committee meetings to document false grant dates - at times using the names of other committee members with a signature stamp.
As a result of the allegedly misleading disclosures, KLA overstated its net income in fiscal years 1998 through 1999 by as much as 47 per cent. Juniper overstated its 2003 net income by nearly 22 per cent. This year, Juniper restated its financial earnings, showing nearly $900m in previously unreported compensation expenses.
"The Commission's action ... confirms that attorneys are no less bound by the securities laws than other public company executives," said Linda Chatman Thomsen, the SEC's director of enforcement. "At both KLA and Juniper, Ms. Berry was in a unique position to insure that the companies accurately disclosed their stock option expenses; instead, she facilitated their fraud on investors."
The SEC announced yesterday that — of course without admitting or denying the allegations — Juniper has consented to a permanent injunction against violations of the anti-fraud provisions of the federal securities laws. Juniper said it has done so without being fined, and the investigation is closed.
The charges against the company and Berry stem from an industry-wide probe of backdating investigation by the SEC. Last week, the commission fingered former Brocade CFO Michael Byrd with eight counts of fraud related to backdating stock options. Earlier this month, Gregory Reyes, Brocade's former CEO, was found guilty of backdating securities fraud. The company's former HR veep, Stephanie Jensen, also faces charges. ®