Stock options backdating trial starts in SF

Jury selection began in federal court in San Francisco Tuesday in the case of a former Silicon Valley general counsel accused of changing the date of a stock purchase option to increase his profit.

Kent Roberts, 51, of Dallas, was formerly general counsel of Santa Clara-based McAfee Inc., a computer security company. He was fired in May 2006.

Prosecutors have alleged in court papers that he increased his potential profit by $197,600 by having the date of a stock option purchase grant changed from Feb. 14 to April 14, 2000, in company computers.

The change in date gave Roberts the ability to buy 20,000 shares of the company at a lower price of $19.75 per share instead of the original price of $29.62 per share, according to prosecutors.

Roberts faces two counts of mail fraud and one count of falsifying company books in connection with the alleged date change.

The practice of granting options to buy company stock is used as a compensation and recruitment tool for corporate employees. Backdating, or changing the date of an option, is not illegal in itself, but it is illegal to lie about it or fail to disclose it in regulatory filings.   

The trial in the court of U.S. District Judge Marilyn Patel is expected to last two to three weeks.

Roberts is the third corporate executive to go to trial in federal court in San Francisco in a stock options backdating case.

In separate trials in 2007, two former executives of San Jose-based Brocade Communications Systems Inc. were convicted of charges related to the falsification of dates of stock purchase options for other employees.

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