A former finance executive of McAfee Inc. agreed to pay nearly $750,000 to settle civil fraud charges with the Securities and Exchange Commission. Eric G. Borrmann, who held a variety of financial positions, including treasurer for McAfee, was accused of engaging in a multimillion dollar financial fraud from mid-1999 until his departure from the company in July 2000. At one time, McAfee was known as Network Associates.
The complaint also accused him of earning approximately $314,517 from illegally trading McAfee securities with insider information. Borrmann, who agreed to settle without admitting or denying the SEC’s allegations, agreed to be barred for five years from serving as an officer or director of a public company. He also agreed to pay $757,563, including $314,517 in disgorgement of his illegal trading profits, $128,529 in prejudgment interest, and a civil penalty of $314,517.
The SEC explained in its complaint that Borrmann, who was responsible for all financial planning and investor relations at the company, routinely assisted other senior McAfee executives in calculating and forecasting the company’s quarterly and yearly financial performance. The regulator asserted that through regular meetings with McAfee’s senior executives and managers, Borrmann learned of certain fraudulent schemes that McAfee was using during 1999 and 2000 to inflate its revenues. The SEC further alleged that in the second quarter of 2000, Borrmann helped McAfee’s executives and senior managers prepare and deliver to investors “false and misleading information” about McAfee’s financial results, including its inflated revenues and earnings.
The complaint also charges that after his resignation from McAfee, Borrmann engaged in insider trading from July through September 2000. The Commission noted that Borrmann is its fifth civil enforcement action related to McAfee’s accounting fraud. Previously, the regulator filed civil actions against McAfee Inc., McAfee’s former Chief Financial Officer Prabhat Goyal, and two former controllers, Terry Davis and Evan S. Collins.