SEC Charges Former Chairman and CEO of Brooks Automation in Stock Option Fraud

The Securities and Exchange Commission has filed a civil fraud action against Robert J. Therrien, former President and CEO of Brooks Automation, Inc., a Massachusetts software company, alleging that he received millions of dollars in undisclosed compensation by fraudulently backdating his exercise of an option to purchase company stock.

Therrien also is alleged to have engaged in a broader fraudulent scheme to grant himself and other Brooks employees and executives undisclosed, in-the-money stock options. The complaint alleges that Therrien personally benefited by more than $10 million from his fraudulent conduct.

"All companies must play by the same rules when it comes to accounting for employee compensation and reporting its impact on the company's bottom line," said Linda Chatman Thomsen, Director of the SEC's Enforcement Division. "Executives who violate these rules for their own personal benefit will be held accountable for their actions."

David Bergers, Director of the SEC's Boston Regional Office, added, "Investors have the right to complete and accurate information about the financial condition of public companies and the compensation their executives receive. The Commission will continue to aggressively pursue actions against individuals who engage in fraudulent options practices that mislead investors."

The Commission's civil complaint alleges that Therrien received approximately $5.8 million in undisclosed compensation in November 1999, when he fraudulently backdated his exercise of an option to purchase 225,000 shares of Brooks stock. According to the complaint, after learning that his option had expired unexercised in August 1999, Therrien signed false documents indicating that he had actually exercised his option before its expiration. As a result, the company issued Therrien a new in-the-money option at the original price, which he immediately exercised to purchase company stock at a fraction of the market price when the option was re-issued.

The Commission's civil complaint further alleges that, on at least four occasions from 1999 through 2001, Therrien approved the issuance to company executives and employees of stock options that were backdated to earlier dates on which the stock's market price was lower. Through backdating, options that were in-the-money (with exercise prices below the market price) on the date they were actually granted were disguised as at-the-money options (with exercise prices at the market prices) purportedly granted on an earlier date. As a result of these instances of option backdating, the complaint alleges, Therrien received another $4.6 million in undisclosed benefits. The complaint alleges that as a result of Therrien's misconduct, he benefited by a total of at least $10.4 million and Brooks overstated income and understated employee compensation expenses by at least $54 million in its financial statements during the period from 1999 through 2005.

The complaint alleges that by his conduct Therrien violated the general antifraud provisions of the federal securities laws and provisions that prohibit misrepresentations to auditors and falsification of records, and that he aided and abetted Brooks in its violations of financial reporting, recordkeeping and internal controls requirements. The Commission's action seeks injunctive relief, a civil penalty, disgorgement and an officer and director bar against Therrien.

In a separate matter, the United States Attorney's Office for the District of Massachusetts today announced a criminal indictment charging Therrien with tax evasion for his conduct in connection with the November 1999 option transaction.