Options scandal claims CNET, McAfee chiefs
Fat cream formula turns sour for five more
Two top McAfee execs and three CNET Networks chiefs have quit their jobs in the wake of America's growing backdated options scandal.
Security software firm McAfee has appointed board member Dale Fuller as interim chief executive and president after CEO George Samenuk resigned, and president Kevin Weiss was fired by the board over misallocations of McAfee stock. Fuller joined McAfee's board in January, having previously served as Borland Software's CEO.
Additionally, McAfee said it will re-state earnings for a 10-year period, a move that is expected to cost between $100m and $150m.
And so to Shelby Bonnie, CEO and co-founder of CNET Networks - the biggest online tech site - today quit his job over misallocations of CNET stock, between "at least" 1996 and 2003. But, get this: Bonnie retains his position - and presumably remuneration - as a CNET board member.
Two other CNET employees have also resigned, following an investigation by a special committee, which reports: "A number of executives of the company, including the former CFO and the recently resigned CEO, general counsel and SVP of human resources, bear varying degrees of responsibility for these deficiencies."
In a departing statement on Wednesday, Samenuk - McAfee's CEO for six years - said: "I regret that some of the stock option problems identified by the special [options] committee occurred on my watch. I am proud of the accomplishments of the McAfee team in serving our millions of customers during my tenure."
Bonnie expressed his deep disappointment. "I apologize for the option-related problems that happened under my leadership," he said.
The fat cats that caught the cream
Samenuk, Weiss and Bonnie are the latest casualties in a scandal that has seen some 120 US public companies - most in IT - either come under government investigation, or launch their internal probes into allocation of stock. So far, more than 30 executives, including CEOs, presidents, CFOs and heads of human resources (HR), have left companies that are under investigation. Executives from two, Brocade Communications and Comverse Technology, have been indicted.
Internal investigations are intended to clear house and stave off prosecution by either the US government or financial regulators. The FBI and the Securities and Exchange Commission (SEC) are taking a tough line to help restore the public's confidence in the market place. Misallocation of stock, involving falsifying the date when grants were awarded, is believed to have cost $2.5bn in earnings.
It became common practice for tech companies to hand out stock to retain staff in the highly competitive recruitment environment of the late 1990s. It also became common practice, though, to bend the rules over when stock was granted, without anyone really bothering to stop and question the legality.
In the Brocade case, ex-chief executive George Reyes was granted sole authority to approve stock allocations - a process that usually goes through a special committee at most corporations. Prosecutors claim the practice of backdating stock became institutionalized at Brocade, as it drew the active support of the former vice president of HR and CFO. ®