SafeNet to pay $1 million to settle non-GAAP case: SEC

WASHINGTON (Reuters) - SafeNet Inc SFNT.UL agreed to pay a $1 million settlement in what U.S. securities regulators said was their first enforcement case against a company for using non-GAAP financial measures to mislead investors.

SafeNet did not admit or deny any of the alleged wrongdoing involving earnings management and options-backdating schemes from the fourth quarter of 2000 through May 2006, the U.S. Securities and Exchange Commission said in a statement.

The SEC said it was the agency's first action enforcing Regulation G, which prohibits a publicly traded company from disclosing material information that includes a financial measure not calculated under Generally Accepted Accounting Principles (GAAP). Regulation G requires companies to reconcile non-GAAP financial measures -- which often exclude unusual or non-recurring expenses -- to the most directly comparable GAAP financial measure.

SafeNet told investors its non-GAAP earnings excluded certain non-recurring expenses, the SEC said. However, the company had actually misclassified the expenses and excluded a "significant amount" of recurring, operating expenses from its non-GAAP earnings results to meet earnings targets, the agency said.

The SEC also accused SafeNet of backdating options for certain company executives to take advantage of dips in the company's stock price without recording the required compensation expense for the option grants.

Settlements were also reached with former Chief Executive Anthony Caputo, former Chief Financial Officer Kenneth Mueller, and three former accountants -- Clinton Greenman, John Wilroy and Gregory Pasko, the SEC said.