UPDATE 1-SEC gets asset freeze in stock options fraud case

(Adds Bowers comments)

WASHINGTON, May 3 (Reuters) - The U.S. Securities and Exchange Commission said on Thursday it had received permission to freeze the assets of a former stock options administrator at Wireless Facilities Inc. WFII.O, accusing him of fraudulently issuing more than 700,000 shares of company stock and options to himself and his wife.

The SEC said Vencent Donlan defrauded San Diego-based Wireless Facilities and its shareholders by abusing his position and transferring the company's stock and stock options to an account in his name. It said his actions resulted in a profit of at least $7.7 million.

U.S. District Judge John Houston in California issued the asset restraining order May 2, the SEC said.

The SEC's complaint charges Donlan with securities fraud and names his wife, Robin Colls Donlan, as a relief defendant because she profited from the fraud, the agency said.

Attorneys for the defendants could not immediately be reached.

Wireless Facilities said on Thursday it had sued the Donlans to recover damages. The company said it discovered the apparent thefts through its ongoing review of past stock option granting practices.

The SEC is seeking disgorgement of the ill-gotten gains and civil monetary penalties from Vencent Donlan and disgorgement of profits from his wife.

The SEC's complaint said that, between November 2002 and November 2003, Vencent Donlan transferred Wireless Facilities shares and stock options to a brokerage account by using stock options software to create and then hide the unauthorized stock options grants.

It said he or his wife exercised the options and sold the stock on the open market, transferring the proceeds to other accounts. The SEC said some of the funds may have been used to buy real estate, including a home in San Diego for $942,000 in cash and property in Julian, California, for $655,000 in cash.

Kelly Bowers, the SEC's assistant regional director for enforcement in Los Angeles, said he believes the Donlan case is the first of its kind that the SEC has brought.

"The manual tasks relating to (stock option issuances) were vested with one person," Bowers said. "There should be checks and balances."