In January of 2007, we brought you the story of a Silicone Valley company called Mercury Interactive, which was trying to bar media access to a detailed civil court complaint filed by shareholders against the company.
Mercury Interactive for months has been waste deep in the stock options backdating scandal, defined in the simplest terms possible as a version of card counting in which corporate executives can maximize their personal compensation by finding a date on the calender at which their stock was valued the lowest. That way, they can both buy the stock from the company at a fire sale price and then sell it when the company’s performing well, which results in a huge windfall profit. Another comparison might be knowing winning lottery numbers in advance.
Details of the scheme allegedly perpetrated by Mercury Interactive execs appeared in the civil complaint and it named names, so defense attorneys tried to keep them sealed off from the press. But local and national news outlets — including the Chronicle, a San Francisco legal newspaper and other business news services — sued to open them up. The Wall Street Journal ended up getting a hold of the documents before the drama could really play out in court.
A year-and-a-half later, Mercury Interactive CFO Sharlene Abrams has been indicted by federal prosecutors for tax evasion and aiding in the preparation of false tax returns. She’s looking at 11 years in prison and $750,000 in fines if proved guilty. It’s the first case in Northern California where someone’s been charged with criminal tax violations from the backdating scandal. Hewlett-Packard bought Mercury in July 2006. More details after the jump.