Read The Recorder‘s roundup of the stock-option backdating scandal. There won’t be a test later … but there might be a subpoena.
In revealing privileged communications between the company and its inside and outside lawyers, KLA gave the commission fodder to sue former CEO Kenneth Schroeder and ex-GC Lisa Berry for securities fraud, but escaped with only token injunctive relief.
Similarly, Juniper Networks � where Berry also served as GC, and which had a restatement of nearly $900 million � also got off with a settlement that didn’t include a fine. But Berry was charged by the SEC for behavior at Juniper as well, based on the company’s probe.
In those cases and others like them, said defense lawyers, companies willing to fire executives may want to waive privilege to convince SEC lawyers that problems have been rooted out. The same goes for individuals � like Marvell’s Gloss � who argue that information covered by a company’s privilege can help them out of trouble.
“When you represent an individual, you want to get that information in front of the SEC,” said Leigh Kirmsse, a partner at Howrey who represents executives in options cases.
She and other defense lawyers said companies have been trying, with some success, to navigate around privilege issues by presenting their internal probes as narrative or visual presentations to the SEC, and not providing documents.
One enduring concern, the lawyers said, is providing fodder for private civil suits � the cost of which can negate the benefit of dodging an SEC fine.
A broad privilege waiver, Friese said, means the documents are widely available. “It opens up the door for the private plaintiff bar,” he said.
PRIVILEGED INFORMATION
In the case of Marvell, said lawyers briefed on the situation, the privilege dance between the SEC and a company hoping to keep its problematic investigation under wraps was eventually resolved, if only temporarily.
The company had already let Gloss tell the SEC about options problems that were the subject of the investigation, said people briefed on the case, but balked when the regulators wanted to question him about the probe itself.
After weeks of negotiations, Marvell’s lawyers at Wilson Sonsini Goodrich & Rosati agreed with the SEC on a carefully delineated waiver that specifies which questions Gloss would be asked.
Lawyers briefed on the case said that, with that hurdle in the past, the case is moving forward now. In recent weeks, they added, federal criminal prosecutors have also shown increasing interest in Marvell.
A Wilson Sonsini spokeswoman said Steven Schatz, the partner representing Marvell, couldn’t comment on the privilege discussions.
Gloss’s lawyer, Miles Ehrlich of Ramsey & Ehrlich, also wouldn’t get into details of the waiver issue. “Matt has been fully cooperating with the SEC, and will continue to do so, consistent with his ethical obligations as Marvell’s former general counsel,” he said.
