DOJ Charges Former Safenet Exec With Stock Backdating

Former Safenet Inc. Chief Financial Officer Carole Argo was charged Wednesday with eight counts of securities fraud and conspiracy in connection with backdating millions of dollars worth of stock options, the U.S. Department of Justice (DOJ) said.

U.S. Attorney for the Southern District of New York Michael J. Garcia filed the charges, alleging that between 2000 and 2006, Argo and co-conspirators, who were not named, systematically backdated stock option grants and conspired to conceal the practice from Safenet's board of directors and shareholders. By doing so, Argo and the others also would have caused the information security systems vendor to incorrectly report its revenue during that period.

Argo is expected to be arraigned Thursday at 3:30 p.m. Eastern Time in Manhattan federal court. She faces a maximum of 25 years in jail and a fine per count of US$250,000 or twice the gross gain or loss resulting from the crime.

Stock option grants are offered to employees of some publicly listed companies as a financial incentive in lieu of salary. Backdating options offers the receiver the option to buy company shares at a price lower than on the day the option was actually granted, giving the buyer a greater return. The practice of backdating is illegal under U.S. Securities and Exchange Commission (SEC) regulations.

The SEC has been aggressively investigating backdating of stock options and has filed charges against executives from companies including Monster Worldwide Inc. and Take-Two Interactive Software Inc.

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