It also highlighted Roberts’ involvement in backdating two other stock option grants approved in January 2002–a grant of 420,000 options to Samenuk (the “Samenuk Grant”) and a grant of 500,000 options to a newly hired executive named Art Matin (the “Matin Grant”).In late February 2007, the DOJ procured an indictment and the SEC filed a civil complaint.An inconsistency in successive emails from Roberts–the first called January 15 the effective date, and the second called January 16 the effective date–supported these allegations.The SEC also alleged that Roberts had acted “recklessly” in connection with the Matin Grant. UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 10-15670 October 14, 2011, Argued and Submitted, San Francisco, California November 7, 2011, Filed PRIOR HISTORY: Appeal from the United States District Court for the Northern District of California. About three years after the two men modified the Promotion Grant, Davis pleaded guilty to an accounting fraud aimed principally at concealing the financial consequences of low demand for Mc Afee products. Davis had a criminal history that made Roberts’ story, even his version of it, look bad.The next day, the stock dipped to .43, and, according to the indictment and SEC complaint, Roberts unilaterally [**8] decided to re-price the options to that lower price.
Roberts says he did not acknowledge any problems with his Promotion Grant, and he perceived none. On May 16, 2006, the Center for Financial Research and Analysis (“CFRA”) published a report identifying seventeen companies that, judging by data showing that they had granted large numbers of options “at exercise prices and dates that matched exactly or were close to a 40-day low in the[ir] . Within days of the report’s publication, Mc Afee began an internal review of its stock option practices, and the Securities and Exchange Commission (“SEC”) opened an investigation the following week. Roberts’ involvement in backdating the Promotion Grant came under scrutiny in 2006, during a nationwide probe into options backdating that implicated Mc Afee. stock price,” had likely engaged in widespread backdating. The report identified five suspicious Mc Afee option grants.Both actions focused on the Promotion Grant, but not exclusively.They also accused Roberts of wrongdoing in connection with the Samenuk Grant.The Board’s Compensation Committee had met and approved that grant on January 15, 2002, when the stock closed at .19.As Corporate Secretary, Roberts attended the meeting.In November 2006, the Howrey lawyers, after an investigation that included periodic reports to the SEC and DOJ, presented their conclusions to the government agencies.The presentation highlighted Roberts’ modification of the Promotion Grant. (“Mc Afee”), alleges that Mc Afee maliciously prosecuted and defamed him in an attempt to deflect attention from largescale backdating of stock options within the company. Because an option’s strike price is typically equal to the stock price at the market’s close on the grant date, changing the grant date can change the strike price. OPINION BY: TASHIMA OPINION TASHIMA, Circuit Judge: Kent Roberts, the former General Counsel of Mc Afee, Inc. Background Sometime late in 2000, Roberts allowed Terry Davis, Mc Afee’s Controller and Senior Vice President, to backdate 20,000 stock options that the company had issued to Roberts months earlier as a reward for a promotion (the “Promotion Grant”).1 Backdating refers to the practice of dating an option grant retrospectively — that is, at some earlier date when the company’s stock was trading at a lower price than on the date of the grant.