Backdaters Catch the I.R.S.'s Eye

Its open season on stock option backdaters, and federal securities authorities have a new suspect in their sights.

A former chief executive of Brooks Automation, Inc., a Chelmsford, Massachusetts, software company, was slapped with a criminal tax evasion charge Wednesday, the same day he was charged with a civil complaint that he manipulated stock options between 1999 and 2005, fraudulently gaining more than $10 million.

Both charges were filed Wednesday against Robert J. Therrien, of Osterville, Massachusetts, who is also a former president of the company, which makes equipment used in microchip factories.

Securities investigators have been looking at dozens of companies, many in the technology field, for suspect timing of stock option awards. This is the first such case brought involving a Massachusetts company.

The S.E.C. accused Therrien, 72, of fraudulently backdating his exercise of an option to purchase company stock, and engaging in a scheme to manipulate grants of stock options to provide himself, along with other company executives and employees, with more lucrative options.

These higher compensation expenses were never disclosed to shareholders, the complaint, said.

Both cases were filed in the U.S. District Court for the District of Massachusetts.

Therrien, who retired as Brooks' chief executive in 2004 and left as board chairman in early 2006, has denied the charges.

"Mr. Therrien, an engineer by training and a founder of the company Brooks Automation, relied upon the advice of tax experts, accountants and attorneys and paid millions of dollars in taxes relating to this transaction," his lawyers said in a statement.

They added that everything involving his compensation was approved by the company's compensation committee, reviewed by company lawyers and an outside law firm, and approved by independent outside auditors.

Brooks Automation issued a statement saying it was cooperating with prosecutors, and noting that it had not been charged with any wrongdoing.

An internal investigation by independent directors and outside advisors, the company said, had found "no one now affiliated with the company, including current management, was complicit in any intentional wrongdoing."

In July 2006, Brooks restated its financial results for fiscal years 1996 through 2005 to take into account $64.5 million in erroneous stock option grants.

According to the S.E.C. filing, Therrien received $5.8 million when, in November 1999, he exercised an option to buy 225,000 of Brooks' stock. The complaint said that when Therrien learned the option had expired the previous August earlier, he "signed false documents indicating he had actually exercised his option before its expiration."

With his newly issued option, he immediately bought stock at a fraction of the market price, the complaint charged. The failure to report the nearly $6 million he realized from the transaction is the crux of the tax evasion charge, also filed in federal district court in Boston.

And that wasn't the only time Therrien fiddled with options timing, the S.E.C. said. On at least four occasions from 1999 to 2001, he approved issuing options to company employees that were backdated to a time when the stock's price was lower - gaining another $4.6 million for himself.

by Elizabeth Olson