Top Executives of McAfee, CNET Depart in Wake of Options Probes
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October 11, 2006 11:02 a.m.
Two technology companies, McAfee Inc. and CNET Networks Inc., announced the departure of several executives, including each firm's chairman and CEO, as the fallout from stock-options backdating probes continued to spread.
McAfee, a maker of security and antivirus software, said George Samenuk has resigned as chairman and chief executive in the wake of findings of a stock-options probe by a special board committee. The board also terminated the employment of Kevin Weiss as president.
McAfee, which disclosed in June that regulators had opened a formal probe of its options practices, named Dale Fuller as interim CEO and president. Mr. Fuller joined the board in January 2006 and served more than six years as chief executive of Borland Software Corp.
Separately, online publisher CNET Networks Inc. announced the resignation of its chairman and CEO, Shelby Bonnie, and said its general counsel and head of human resources have also resigned, as a result of an internal options probe.
"I apologize for the option-related problems that happened under my leadership," said Mr. Bonnie, who co-founded the Internet media company in 1993 and had served as its CEO since 2000. He will remain a director.
The company named Neil Ashe as its new chief executive. Mr. Ashe, who joined CNET in 2002, was executive vice president. CNET also appointed board member Jarl Mohn, a former radio and television executive, as non-executive chairman of the board.
The San Francisco company, which disclosed in June that regulators had opened a formal probe, said Wednesday its internal review found "deficiencies" in the way options were granted, including in some instances the backdating of grants, during the period from the company's IPO in 1996 through at least 2003. A number of executives, including Mr. Shelby, the former chief financial officer as well as the recently resigned general counsel and senior vice president of human resources, "bear varying degrees of responsibility for these deficiencies," the company said.
CNET, which expects to restate its historical financial statements, said the probe did not find "any current employees of CNET or any recently resigned employees engaged in intentional wrongdoing." The company said the former executives and directors who received improperly priced options have agreed to have them repriced to the fair market value of the appropriate date.
'Best Interests of the Company'
McAfee, Santa Clara, Calif., said it determined it will need to restate certain financial results to record additional non-cash charges for stock-based compensation expense over a 10-year period. The charges are likely to range between $100 million and $150 million, the company said.
"I regret that some of the stock option problems identified by the special committee occurred on my watch," said Mr. Samenuk in a press release. A 22-year veteran of International Business Machines Corp., Mr. Samenuk joined McAfee in 2001.
McAfee said it has created a search subcommittee to find a permanent CEO and will look at both internal and external candidates. The company also named Charles J. Robel as non-executive chairman. Mr. Robel, a venture capitalist, has been a board member since June.
The severity of McAfee's options problems came to light in late May when the company fired its general counsel, Kent Roberts, after its internal review revealed an improper options grant involving Mr. Roberts in 2000. In August, the company said it received a grand jury subpoena from the U.S. attorney's office for the Northern District of California relating to the termination of Mr. Roberts.
McAfee and CNET are among more than 100 companies facing probes by federal investigators into possibly fraudulent options practices. The probes are focused on so-called backdating of grants, which occurs when a grant bears a date earlier than when it was actually approved; typically the company's stock price is lower on the earlier date, conferring to the recipient the chance for extra profit.
Other top executives also have been ousted or left their positions as a result of these probes. Software maker Mercury Interactive Corp., one of the first companies to disclose problems with backdated options, last year dumped CEO Amnon Landan, as well as its chief financial officer and general counsel.
Perhaps the most famous executive caught up in the options scandal is Jacob ``Kobi'' Alexander, the fugitive former CEO of software company Comverse Technology Inc. He's in the southern African nation of Namibia, awaiting extradition to the U.S. to face charges of manipulating options.
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