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Damning Memos in Maxim Backdating Case Are Fakes, Defense Suggests
The Recorder
October 09, 2009
When SEC lawyers sued former Maxim Integrated Products CFO Carl Jasper for backdating stock options, they pointed to some damning evidence. It was handwritten notes from Maxim CEO Jack Gifford instructing Jasper to expense the backdated options, a step that would have made the backdating legal.
But now Jasper's lawyer, Steven Bauer of Latham & Watkins, is trying to poke holes in the evidence, suggesting that those notes were faked. The allegations were made in a motion Tuesday to compel the SEC to turn over transcripts of an interview with Gifford, who died in January.
If they are real, the notes would help the SEC prove that Jasper knew that what he was doing was wrong, and would also largely exonerate Gifford. The SEC, which makes little mention of those notes these days, has stressed in filings that it has plenty of evidence against Jasper.
In a press release at the time of the December 2007 lawsuit, the SEC said that Jasper "disregarded instructions from CEO Gifford to record an expense in connection with certain backdated options." Gifford settled with the SEC for $800,000 at the time. The Sunnyvale, Calif., semiconductor product company, which later restated earnings by a whopping $495 million, wasn't fined.
"This case began with a press release and complaint claiming the notes were decisive," Bauer said on Wednesday. "Let's see where the actual evidence takes us."
The evidence, as far as Bauer sees it, is that Gifford faked the notes after the scandal came to light. For instance, his side says there are two versions of one of them. Each is scrawled on a copy of the same typed memo: The first reads: "Hot! Carl -- These options are approved;" the second reads: "Carl -- I've made changes on the attached. Just use a $20/22 price. It's too late to do in Oct. It's an expense but it's OK." The problem is that while the first note has a fax header with the date "Mar 03 03," the second had the date "DEC-14-2006," which was after Maxim had begun its internal investigation.
The Latham lawyer also tries to bolster his point with testimony from Walter Brown Jr., the Orrick, Herrington & Sutcliffe partner who handled the internal investigation at Maxim. Bauer deposed Brown, who was represented by Orrick partner James Kramer, at Latham's Menlo Park office on Sept. 25.
Brown said in the deposition that he expressed "concerns about whether the notes were authentic" to the SEC in February 2007. And he laid out five reasons, including that Gifford was known to be opposed to expensing, internal investigators couldn't get copies of the original notes, Gifford's handwriting was normally much sloppier and one note was found filed in the wrong place.
Orrick also hired a handwriting expert who was unable to conclude whether the notes were written when they were supposedly written.
For its part, the SEC hasn't mentioned the notes since it filed the suit. San Francisco SEC Chief Marc Fagel declined to comment on them and pointed to the summary judgment motion his office had filed in the case Monday.
In that motion, the SEC reiterates that it has other evidence against Jasper showing that he schemed to backdate stock options, that he came up with falsified documents to make it appear like the options weren't backdated, and that he prepared numerous false financial statements. However, the SEC makes no mention of Gifford's notes in the motion.
The Latham lawyers want access to the SEC's interview with Gifford to find out what they talked about and whether it included questions about the controversial notes.
