When we saw this week that the Securities and Exchange Commission had settled its case against William Sorin, the former general counsel of Mass.-based Comverse Technology, we wondered whether the same fate awaited the many displaced general counsel here in Silicon Valley who are very probably under SEC suspicion too.
After all, sources say McAfee’s former GC Kent Roberts is likely to be criminally indicted soon. Apple’s former GC Nancy Heinen is also under a cloud, as is CNET’s ousted GC, Sharon Le Duy. Mercury Interactive’s general counsel, Susan Skaer, resigned because of involvement in backdating activities in November 2005.
The SEC ordered Sorin, who pleaded guilty in November to criminal charges in connection to backdating of stock options, to pay more than $3 million in civil penalties, disgorgement and prejudgment interest. He was also banned from ever serving as an officer or director at a company and suspended from practicing before the SEC.
In a press release about the settlement, Linda Chatman Thomsen, director of the SEC's enforcement division, made it pretty clear this wouldn’t be the last of the backdating settlements: "Today's settlement signals that the Commission will vigorously pursue those responsible for backdating schemes wherever the investigation may lead, even, as appropriate, into the offices of corporate counsel."
Wayne State University Law School Professor and blogger Peter Henning tells us it’s tough to know whether Sorin’s settlement will be an exact template for how the SEC treats other GCs. The fraud at Comverse was particularly egregious, he said. However, the settlement does indicate that the SEC will pursue disgorgement and heavy penalties for backdating and follows the agency’s previously stated desire to focus on lawyers.
“This is going to get noticed,” Henning said. “I don’t know if it’s a benchmark but it shows what the commission is going to be looking for in these cases. They’re going to be looking for a civil penalty.”
Henning surmised that Sorin will probably serve as a major witness against former Comverse Chief Executive Kobi Alexander. That is, if Alexander ever gets extradited to the United States. He’s currently taking refuge in Namibia.
“The hearing on extradition is in April of this year, but the appeals process could take years,” Henning said. “Don’t hold your breath.”
— Jessie Seyfer
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