SEC Accuses Former Pixar CFO of Backdating
Academy Award-winning Pixar Studios — creator of such fun-loving CGI-animated films as “Finding Nemo” and “Ratatouille” — has become the most recent company to be caught up in the backdating scandal. The SEC’s Los Angeles office says it plans to recommend that the agency take civil action against Pixar’s former CFO, Ann Mather, who worked at the company from 1999 to 2004. The accusation: that Mather approved the improper dating of stock-option grants. Here’s Nick Wingfield’s WSJ report.
According to the report, the SEC is alleging violations of federal securities laws relating to options transactions that occurred while Pixar was an independent company. (Now it’s owned by Disney Co.) The agency’s action was disclosed yesterday in a regulatory filing by Google, where Mather serves on the board.
Mather’s attorney, Dewey & LeBoeuf’s Timothy Coleman, said, “There is no basis for any legal action against her.”
In 2006, Disney said the SEC was looking into Pixar options granting. But last year Disney reportedly closed its own inquiry, concluding that backdating had occurred prior to its acquisition of the company and that no one currently associated with Disney had engaged in intentional misconduct. Those findings appeared to exonerate Steve Jobs, the former CEO of Pixar and now a Disney board member as well as CEO of Apple.
A source told the WSJ that Pixar’s options-granting practices were in place before Mather joined, and that Pixar’s board, its auditors and its outside legal counsel at Wilson Sonsini were aware of the practices. “We have the utmost confidence in Ann’s integrity, as well as her abilities as a director, and we continue to support Ann’s re-election to our board of directors,” wrote Eric Schmidt, Google’s CEO, in a release.
Source: Wall Street Journal
SURETY'S TAKE ...
Alleged Backdating Comes Back to Haunt Elite CFOClaiming that she fully complied with Pixar’s own practices, Mather believes there is no ground for legal proceedings. Even if Mather is not found guilty, the suit should serve as a wake-up call for the company to keep better track the authenticity of electronic documents, including stock option grants. Failing to have done so may cost the company a piece of its reputation, as well as the rust of its investors.
DeterrenceSurety’s AbsoluteProof® provides long-lasting objective proof of the time and content integrity of electronic documents, such as stock-option grants. With AbsoluteProof in place, any alteration of an electronic record – no matter how minute – will be detected.
GovernanceIf Pixar had implemented AbsoluteProof, it would have saved itself from this mess of accusations and legal proceedings by deterring and detecting wrongdoing. If Mather did indeed backdate stock options, the change would have been discovered and Pixar would not find itself in this sticky situation. If Mather did not alter the option grants, she would have the irrefutable proof needed to demonstrate her innocence. Neglecting to have a data-level security solution in place put both Mather and Pixar’s reputations on the line. If Mather is found guilty, Pixar can expect to be pressed on the validity and security of its electronic records.
Litigation ReadinessElectronic records, including stock option grants, are easily susceptible to malicious alteration, tampering and forgery. It’s critical to protect your digital assets by avoiding and deterring unwanted changes to records. Courts are beginning to crack down on authentication of electronic records, making it increasingly difficult to prove the originality of your records if not properly stored and digitally time-stamped. Using AbsoluteProof, Pixar and Mather could have avoided this controversy and saved themselves from becoming the latest in an increasingly long line of backdating stories.