Sycamore settles stock-option case - www.tradingmarkets.com - July 10, 2008

Sycamore settles stock-option case

CHELMSFORD, Jul 10, 2008 (The Sun - McClatchy-Tribune Information Services via COMTEX) --
SCMR | Quote | Chart | News | PowerRating -- Sycamore Networks Inc. and three of its former executives have settled federal charges in regards to the backdating of employee stock options over a three-year period earlier this decade.

According to the U.S. Securities and Exchange Commission, former
Chief Financial Officer Frances Jewels and former Director of Financial
Operations Cheryl Kalinen fraudulently backdated options grants to
obtain more favorable options prices for employees.

A third former employee, Director of Human Resources Robin A. Friedman, was charged with helping to mislead Sycamore's auditors.

All three individuals settled by paying a collective $668,000 in
penalties and reimbursements, with none admitting or denying the
allegations.

"This case demonstrate the importance of companies keeping
accurate financial statements because investors rely on them," said
David Bergers, regional director of the SEC's Boston Regional Office,
in a telephone interview with The Sun. "If they're not truthful, then
investors suffer, and ultimately the companies suffer."

Jewels' attorney, Michael Gardener of Boston-based Mintz,
Levin, Cohn, Ferris, Glovsky & Popeo, P.C., released the following
statement: "After three years, the SEC has agreed to resolve this
matter without any admission of liability by Ms. Jewels. She is pleased
to have this behind her without any need for litigation."

Jewels will pay more than $450,000, the SEC said, and is barred from serving as an

officer or director of a public company for five years. Kalinen is paying a total of $178,000, with Friedman paying $40,000.

Sycamore, which Bergers said cooperated throughout the
investigation, has restated its financial results to account for about
$250 million in extra options expenses. The provider of optical
networking gear was not fined, but agreed to refrain from future
securities violations.

James Carroll of Boston-based Skadden, Arps, Slate, Measler
& Flom, LLP, who represented Sycamore, didn't return a call for
comment yesterday.

In a statement, Sycamore President and CEO Daniel Smith said
the company was "pleased that this matter with the SEC is now concluded
as we continue to execute our strategies for the long-term success of
our business."

The SEC alleged that Jewels and Kalinen repeatedly backdated
options grants between October 1999 and July 2002 to prices near
monthly or quarterly low points for the company's stock, thus providing
employees with options with prices at which they could purchase shares
that were lower than the market price at the time the options were
actually granted.

The SEC also alleges that Jewels and Kalinen falsified, or
caused others to falsify, various company documents concerning the
below-market options grants.

Options are rights to buy shares at set prices. They are given
out as a form of compensation, and are attractive to employees at
fast-growing companies.

But as the stock market began to crumble during the early part
of this decade, many companies picked a low point in their stocks'
trading history and used that as the grant date for the options,
benefiting recipients.

Dozens of companies became embroiled in backdating scandals.
Another Chelmsford company, Brooks Automation Inc., settled a $64.5
million case with the SEC in May.

Bergers explained that backdating an option isn't always illegal, but that companies must account for the difference in price.

"That is what's at issue in this case and others that we have," he said.

Founded a decade ago by Smith and Gururaj "Desh" Deshpande,
Sycamore makes optical switches used by communications service
providers to build fiber-optic networks. Its gear enables phone service
carriers, Internet providers and cable companies to provide voice and high-speed data services.

Shares of Sycamore, which reported fiscal 2007 revenues of $156.1 million, closed yesterday at $3.11, down 9 cents.

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