Beyond Backdating: Options Theft

SEC alleges that a former stock-options administrator illegally issued and transferred more than 700,000 shares of stock and stock options to a brokerage account held jointly with his wife.

Forget backdating.

Outright “theft of stock options” was the allegation levied by the Securities and Exchange Commission against Vencent A. Donlan, a former stock-options administrator for Wireless Facilities Inc. The SEC alleges that Donlan defrauded the company by illegally issuing and transferring WFI stock and stock options to an account in his name.

The commission also secured a temporary restraining order from U.S. District Judge John A. Houston freezing the assets of Donlan and his wife, Robin D. Colls Donlan.

According to the SEC, between November 2002 and November 2003, Vencent Donlan issued and transferred more than 700,000 shares of WFI stock and stock options to a brokerage account held jointly with his wife. To do this, he allegedly made false entries in WFI’s stock-option software to create and then hide 27 unauthorized grants, and he provided false information to WFI’s brokerage firm and transfer agent, according to the complaint.

The regulator also charges that Donlan or his wife exercised the options and sold the stock on the open market, realizing net proceeds of at least $7.7 million. The proceeds were then allegedly transferred or paid to other accounts.

The SEC asserts that some of the proceeds may have been used to acquire real estate, including a home in San Diego purchased for $942,000 in cash as well as property in Julian, California, purchased for $655,000 in cash.

In addition to freezing several million dollars in personal and real property, the court order requires an accounting of the couple’s assets, provides for expedited discovery, and prohibits them from destroying evidence.

The SEC complaint charges Donlan with securities fraud and names his wife as a relief defendant because she received proceeds from the fraud. The commission is seeking disgorgement of ill-gotten gains with prejudgment interest from the couple as well as civil monetary penalties and a permanent injunction for Donlan.

An attorney for Vencent and Robin Colls Donlan could not immediately be identified for comment.

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