Refusing to Roll Over

One CFO refuses to settle with the Securities and Exchange Commission over accusations of backdating.

The Securities and Exchange Commission has been gaining ground with its backdating cases, with the December $468 million settlement from UnitedHealth Group Inc. ex-CEO William McGuire setting a new record. But one target — Carl W. Jasper, ex-CFO of semiconductor maker Maxim Integrated Products — refuses to roll over.

Jasper “is not accused of himself receiving any improper options and he wasn’t even the person who had the authority to grant options,” notes his attorney, Steven Bauer, a partner in Latham & Watkins LLP’s San Francisco office, “so the lawsuit against him seems pretty aggressive.” In fact, Jasper maintains his innocence in the face of civil backdating charges, even as his former CEO, John Gifford, settled and agreed to pay more than $800,000 in ill-gotten gains, interest, and fines.

The SEC, however, insists Jasper is a “corporate gatekeeper.” More specifically, the agency charges that Jasper “repeatedly suggested to Maxim’s CEO that the company grant backdated options” and drafted documents to that effect for Gifford to sign. The complaint also notes that Gifford told the CFO to record the compensation expense for the in-the-money options at least four times “if it was material,” but Jasper apparently chose not to.

Jasper’s lawyer says the case could eventually proceed to trial. There, says Jeffrey E. Stone, a partner with McDermott Will & Emery in Chicago, Jasper’s chances are fairly good. The accounting rule that applies to backdated options, APB 25, is so complex that “the government has the difficult burden of establishing that any individual, CFO or otherwise, had the requisite understanding of those accounting rules at the time the events happened,” he says.

The amount of money the SEC seeks from Jasper is not yet known. But if he loses, the ex-CFO should be prepared to open up his checkbook. Other finance chiefs who have settled recently on backdating charges have written big checks (though dwarfed by CEO McGuire’s settlement amount). Ex-Apple CFO Fred Anderson agreed to give back almost $3.5 million in stock gains, plus pay a $150,000 fine. Ex-Comverse CFO David Kreinberg agreed to return $2.4 million in options gains.

Unsettling Amounts

CFO restitution to the SEC for backdating

  • Fred Anderson


    — Apple

    — $150,000 fine

    — Agreed to return $3.5 million in stock gains
  • David Kreinberg

    — Comverse

    — No fine

    — Agreed to return $2.4 million in options gains
  • Gary L. Fischer


    — Integrated Silicon Solutions

    — $125,000 fine

    — Agreed to return $414,830 in gains

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