February 11, 2010, 8:42 PM — Juniper Networks has reportedly agreed to pay $169 million to settle a 4-year-old lawsuit over backdating stock options, a practice that entrapped and embarrassed many high-tech firms over the past decade.
Backdating is an accounting practice in which the dates and amounts on employee stock-options are changed to boost the value of those options. Scores of companies – including many big name high-tech firms – and their top executives were investigated and charged with criminal infractions, and sued by their shareholders.
According to a report by the Associated Press, the penalty is significant for Juniper in that it represents more than half of the company's total profits from last year. It is also one of the biggest settlements of options backdating penalties to date, the AP states.
Managed care company UnitedHealth Group had to pay a $935 million backdating settlement in 2008. Comverse Technology and Broadcom also had to pay stiff penalties last year, to the tune of $225 million and $160 million, respectively.
The Juniper settlement was reached this week by lawyers for the company and a group of New York City pension funds that had invested in Juniper. The settlement must be approved by a federal judge in San Jose, the AP reports.
"This litigation arose from events that occurred more than six years ago relating to the granting of stock options to employees generally," said Mitchell Gaynor, Juniper's senior vice president and general counsel, in a statement e-mailed to Network World. "Those practices have long been eliminated and new controls put in place. We are pleased to put this longstanding matter behind us and do not expect the payment of this settlement to have any ongoing effect on our business operations."
In 2007, Juniper settled Securities and Exchange Commission charges over its options practices. The company did not admit wrongdoing and did not have to pay a fine.
The company took an $894.7 million pretax charge for the years 1999 to 2005 to account for inappropriately inflated options grants.