Wave Systems Corp. (fka WAVXQ)

[dude_danny]

Given the nature of the SEC liabilty, I trust Wave's management will not abuse options IMO. Look what happened to the former CFO of Apple.

http://www.washingtonpost.com/wp-dyn/content/article/2007/04/24/AR2007042400925.html
Apple's Former CFO Settles Options Case
Finance Official Ties CEO Jobs To Stock Backdating Plan

By Carrie Johnson and Alan Sipress
Washington Post Staff Writers
Wednesday, April 25, 2007; Page D01

A former chief financial officer of Apple reached a settlement with the Securities and Exchange Commission yesterday over the backdating of stock options and said company founder Steve Jobs had reassured him that the questionable options had been approved by the company board.

Fred D. Anderson, who left Apple last year after a board investigation implicated him in improper backdating, agreed yesterday to pay $3.5 million to settle civil charges.





Separately, SEC enforcers charged Nancy R. Heinen, former general counsel for Apple, with violating anti-fraud laws and misleading auditors at KPMG by signing phony minutes for a board meeting that government lawyers say never occurred.

Heinen, through her lawyer, Miles F. Ehrlich, vowed to fight the charges. Ehrlich said Heinen's actions were authorized by the board, "consistent with the interests of the shareholders and consistent with the rules as she understood them."

Anderson issued an unusual statement defending his reputation and tying Jobs to the scandal in the strongest terms to date. He said he warned Jobs in late January 2001 that tinkering with the dates on which six top officials were awarded 4.8 million stock options could have accounting and legal disclosure implications. Jobs, Anderson said, told him not to worry because the board of directors had approved the maneuver. Regulators said the action allowed Apple to avoid $19 million in expenses. Late last year, Apple said that Jobs helped pick some favorable dates but that he "did not appreciate the accounting implications."

Explaining Anderson's motive for issuing the statement, his lawyer Jerome Roth said: "We thought it was important that the world understand what we believe occurred here."

Roth said his client, a prominent Silicon Valley figure and a managing director at the venture capital firm Elevation Partners, will not be barred from serving as a public-company officer or board member under the settlement, in which Anderson did not admit wrongdoing. Roth declined to characterize the current relationship between Anderson and Jobs.

The SEC charges are the first in the months-long Apple investigation. Jobs was interviewed by the SEC and federal prosecutors in San Francisco, but no charges have been filed against him.

Steve Dowling, a spokesman for Apple, declined to comment on Jobs's conversations with Anderson. Dowling emphasized that the SEC did not "file any action against Apple or any of its current employees."

Government authorities praised Apple for coming forward with the backdating problems last year and for sharing information with investigators. Apple has not publicly released its investigation report.

Backdating stock options by choosing award dates when the stock price was low gives employees a financial edge by increasing the likelihood that they will profit when they sell the shares. The practice is not necessarily illegal, but it can violate securities laws and accounting rules when it is not disclosed to investors. The SEC is investigating more than 140 companies over backdating.

Heinen and Anderson "failed in their duties as gatekeepers" and caused Apple to underreport expenses by nearly $40 million, according to Marc J. Fagel, who leads enforcement efforts in the SEC's San Francisco office. Last year, Apple restated its financial reports from 1997 to 2002 by $84 million to cover options-related charges.

The SEC did not file charges against Wendy Howell, who reported to Heinen in Apple's legal department and who completed paperwork on an option award for Jobs in 2001.

Ingrid Ebeling, an analyst at JMP Securities, noted that Anderson's response contradicted Apple's earlier statements that Jobs was unaware of the accounting significance of backdating options. Though Anderson might be bitter, Ebeling said, "I would give his statement credibility."

At the same time, she said, the fact that the SEC investigation has proceeded thus far without charging Jobs is a good sign for the Apple chief executive. "Things are looking more favorable for Jobs," she said.

Apple shares fell 27 cents yesterday, to $93.24. The stock fell about 3 percent after Anderson's statement around 1 p.m. but bounced back.

The SEC and Justice Department have also been looking into stock options backdating at Pixar, where Jobs was chairman and chief executive before the company was bought by the Walt Disney Co. last year.

An internal investigation at Walt Disney concluded last month that Jobs had not acted improperly in the award of options to senior Pixar executives. Several of those grants coincided with dates when Pixar stock was at an annual low. Jobs was not one of the recipients.

But two weeks ago, the company said in an SEC filing that it would pay as much as $33.5 million to account for improper backdating of options given to Pixar employees.

dude_danny