Follow all the coverage of Hewlett-Packard’s boardroom spying scandal � and the continuing legal fallout.
Choi said he couldn’t recall ever working on compensation issues at Sanmina, and expressed doubt that an outside lawyer would advise a client that it was acceptable to backdate options.
“This backdating is not a new concept. We all knew about it for a long, long time. Even I knew it as an associate. But I can’t think of any lawyer who would give that advice,” Choi said. “I can’t imagine anyone saying ‘dude, go ahead.’”
That might not be required for a lawyer to receive blame. Several people familiar with Sanmina’s options situation said Mitchell was targeted for failing to pick up on the improprieties.
But when it comes to stock-based compensation, Choi added, “a lot of clients hear what they want to hear. Even if you tell them something, they hear something totally different.”
THE INTERNAL PROBE
Last October, Sanmina announced that a special committee of its board of directors had, with the help of outside counsel, completed an internal probe.
“The special committee found that most stock option grants to executives and other employees between 1997 and 2006 were not correctly dated or accounted for,” Sanmina said. The company said a current and former executive were to blame.
One was ex-president and COO Randy Furr, who left Sanmina in 2005. He later became COO at Adobe Systems Inc., but resigned not long after Sanmina’s announcement. The other was HR director Carmine Renzulli, who left Sanmina after the investigation.
Left out of the public announcement was any discussion of outside counsel. But according to people briefed on the internal probe � which was led by Daniel Bookin at O’Melveny & Myers � it found Mitchell bore some responsibility for the problems since he failed to raise concerns about options practices. Reached last week, Bookin wouldn’t comment.
But people briefed on the probe said Mitchell didn’t advise on all of the company’s option grants; rather, he consulted from time to time on awards, both early in the company’s life and later, during the dot-com boom.
Norman Blears, a partner at Heller Ehrman who represents Sanmina, said Thursday that he couldn’t comment on individuals involved in the case, but did say the company is continuing to cooperate with the SEC and federal prosecutors.
People familiar with the case say it’s unlikely that Mitchell would be a target in the criminal probe of the company’s options, which is led by San Francisco Assistant U.S. Attorney Timothy Lucey. In recent weeks, Lucey and SEC lawyers have been interviewing people involved with the company.
Their interest, said people briefed on the matter, seems to lie more with the former executives than with Mitchell, though the lawyer, they said, could end up as an SEC target.
Sanmina isn’t the only company with options problems to count Rosati as a board member.
At the Management Network Group Inc., a Kansas City-based company, Rosati served on the board while Mitchell was the primary outside counsel. That company recently announced that the majority of its option awards were also improperly dated.
But reached at his Long Island home earlier this week, CEO Richard Nespola said Rosati and Mitchell were nothing but good for the company.
“There was never any indication that Wilson Sonsini gave erroneous or incorrect or improper advice,” Nespola said.
Indeed, he added, his company parted ways with the firm amicably in 2003 due to both the inconvenience of having a California firm represent a company in the Midwest, “and, frankly, rates.”
