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Federal Judge Tosses SEC Counts Against Ex-Mercury Interactive GC
The Recorder
September 17, 2009
One of Silicon Valley's first in-house lawyers to get caught up in the stock option backdating tsunami just got a little legal reprieve.
U.S. District Judge Jeremy Fogel of San Jose dismissed all counts brought by the Securities and Exchange Commission against former Mercury Interactive Corp. GC Susan Skaer, who now goes by the last name of Tanner. The ruling this week was a bit of a reversal for Fogel; he had originally let some of the SEC's suit against Skaer stand, though he had always considered the allegations hazy.
Now, Fogel says regulators must try again. "The SEC had the benefit of more than an additional year of discovery between the filing of its original complaint and the operative [amended complaint], but the allegations regarding Skaer remain quite vague," he wrote.
Following an internal investigation by O'Melveny & Myers, Mercury fired Skaer and other senior executives in 2005. At that time, the company stated that "each of them knew or should have known that the [grant] practices were contrary to the options plan and proper accounting."
But at a recent court hearing, Fogel noted that SEC lawyers conceded Skaer was involved in only three of 45 grants at issue in the case (though the government believes this should not limit her liability). Fogel stated he is now unsure of the scope of allegations against Skaer, and gave regulators another 30 days to get more specific.
A Washington, D.C.-based SEC lawyer who is handling the case did not respond to a message Wednesday afternoon.
"We're certainly pleased with the court's ruling, but no one can give Susan the last five years of her life back," said Orrick, Herrington & Sutcliffe partner Melinda Haag. "We're hopeful the SEC will understand that the case against Susan should simply be dismissed."
