Contrary criminal

A saintly corporate star bilked SafeNet of millions but kept none of it

Sun Special Report

She turned 47 there last week.

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Timeline

1983 - The company that later became known as SafeNet is founded by two security engineers in Timonium.

1986 - Anthony A. Caputo invests, becomes CEO a year later.

1992 - SafeNet goes public.

1999 - Carole Argo is hired as SafeNet's chief financial officer.

2000 - Argo and her family move into Baltimore's Guilford neighborhood.

2001 - Argo backdates stock option grants for herself, Caputo and another individual, but never records a compensation expense, an illegal act.

2004 - Argo is promoted to SafeNet's chief operating officer. She cashes in some of her backdated options, though she holds on to the shares, richer only on paper.

2005 - Management Science publishes a study that shows a pronounced pattern of companies' awarding of stock options at cyclical dips in their stock prices, causing federal agencies to grow suspicious.

March 2006 - The Wall Street Journal publishes "The Perfect Payday," which outlines multiple instances in which CEOs were awarded options when the stock price was historically low.

May 2006 - SafeNet says it has received a federal subpoena and the SEC is inquiring about backdating.

October 2006 - Argo and Caputo resign.

July 2007 - Argo is indicted on charges of securities fraud and conspiracy.

August 2007 - The SEC files a civil suit against Argo.

October 2007 - Argo pleads guilty to one count of securities fraud.

January 2008 - Argo is sentenced to six months in federal prison.

February 2008 - Argo reports to the Alderson Federal Prison Camp in West Virginia.

Backdating 101

What's a stock option?

The right to buy stock in the future at today's price. Options are often given to executives as incentives to improve company performance and raise share value.

How do you backdate it?

By marking the award as being granted on an earlier date than it actually was (the opposite of post-dating a check). The older dates are typically chosen because the stock price was particularly low that day.

Is it always illegal?

Not by itself. Shareholders don't like it when companies backdate because the boost in compensation expense eats into revenue.

What makes it a crime?

Not recording the backdating as an accounting expense and falsifying documents to cover your tracks.