Securities News

SEC Charges McAfee, Inc. With Accounting Fraud; McAfee Agrees To Settle And Pay A $50 Million Penalty

McAfee consented, without admitting or denying the allegations of the complaint, to the entry of a Court order enjoining it from violating the antifraud, books and records, internal controls, and periodic reporting provisions of the federal securities laws. The order also requires that McAfee pay a $50 million civil penalty, which the Commission will seek to distribute to harmed investors pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of 2002. In addition, McAfee has agreed to appoint an independent consultant to examine and recommend improvements to McAfee’s internal accounting controls and revenue recognition and reserves practices to better ensure compliance with the federal securities laws. This proposed settlement is subject to court approval.

“This settlement takes into account both the underlying misconduct and the resulting investor harm, as well as the significant benefit that accrued to McAfee from having artificially inflated the price of its stock and using it to acquire other companies, capitalizing on the artificial value McAfee had created through its fraud,” said Linda Chatman Thomsen, the Director of the SEC’s Division of Enforcement. “The company’s channel-stuffing and use of manipulative accounting artifices warrants a severe civil sanction that will act as a deterrent for other public companies and provide a source of funds that can be distributed to injured McAfee investors.”

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	Did You Know?
	Swap: In general, the exchange of one asset or liability for a similar asset or liability Swap: In general, the exchange of one asset or liability for a similar asset or liability for the purpose of lengthening or shortening maturities, or raising or lowering coupon rates, to maximize revenue or minimize financing costs. This may entail selling one securities issue and buying another in foreign currency; it may entail buying a currency on the spot market and simultaneously selling it forward. Swaps also may involve exchanging income flows; for example, exchanging the fixed rate coupon stream of a bond for a variable rate payment stream, or vice versa, while not swapping the principal component of the bond. Swaps are generally traded over-the-counter.