SEC charges former execs of ESSI with backdating
WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission said on Tuesday it charged the former chief financial officer and former controller of Engineered Support Systems Inc. with stock options backdating fraud.
The SEC accused the former CFO, Gary Gerhardt, and the former controller, Steven Landmann, of granting employees and directors about $20 million in unauthorized compensation as a result of the backdating.
Landmann agreed to pay $886,557 to settle charges brought against him in a civil lawsuit, the SEC said.
Engineered Support Systems Inc., a defense contractor was acquired last year by DRS Technologies Inc. DRS.N.
Gerhardt's attorney, Eugene Goldman, said he had not yet read the SEC complaint and could not comment. Landmann's attorney declined to comment.
"Our actions against Gerhardt and Landmann demonstrate the commission's ongoing commitment to addressing fraudulent stock-option practices and ensuring full and fair disclosure of executive compensation," SEC Enforcement Division Director Linda Thomsen said in a statement.
The SEC said Gerhardt and Landmann participated in a six-year scheme in which they granted undisclosed, in-the-money stock options to themselves and to other officers, employees and directors.
Their scheme resulted in the company's top executives and directors receiving $15 million of the total $20 million in unauthorized compensation, the SEC said.
Former executives of ESSI are the latest to face SEC enforcement action resulting from investigations into more than 130 companies over possible mispricing of options. Federal prosecutors also have opened up more than 60 cases.
In January a former general counsel of software maker Comverse Technology Inc. CMVT.O agreed to pay more than $3 million to settle SEC charges. Comverse is one of two high-technology companies, along with Brocade Communications Systems Inc. (BRCD.O), whose executives have faced SEC charges.
Parsippany, New Jersey-based DRS, which paid about $2 billion for ESSI, said in December that it could pay at least $11.8 million for stock options problems.
(Additional reporting by Kevin Drawbaugh)
