Cybersecurity provider Symantec Corp. manipulated the company’s financial results and made false statements to investors until news of an Securities and Exchange Commission investigation spurred by a whistleblower hit the market, a shareholder claims in a derivative action.
Filed in Delaware District Court, the lawsuit launched by plaintiff Boyd Milliken against California-based Symantec also names a slew of Symantec executives, including CEO Gregory S. Clark, as defendants. The lawsuit seeks to “remedy wrongdoing committed by Symantec’s directors and officers from May 10, 2017 through the present,” alleging breaches of fiduciary duties, unjust enrichment, waste of corporate assets and violations of the Securities Exchange Act.
According to the lawsuit, Symantec acquired Blue Coat and LifeLock Inc. in August 2016 and February 2017 but released false and misleading financial statements to portray the success of the acquisitions, allegedly relying upon misleading financials to determine annual incentives for executive compensation. Company executives allegedly improperly recognized $12 million in revenue in connection with the two acquisitions and used it as a basis for their own compensation, resulting in an investigation by the company’s audit committee, the lawsuit says.
Symantec issued a press release on May 10, 2018 revealing that the audit committee investigation stemmed from concerns raised by a former employee related to “historical financial results, its reporting of certain non-GAAP measures including those that could impact executive compensation programs, certain forward-looking statements, stock trading plans and retaliation.”
The news caused Symantec’s share price to drop more than 33 percent from a closing price of $29.18 per share on May 10, 2018 to close at $19.52 per share on May 11, 2018, the suit says.
On Sept. 24, 2018, Symantec announced the completion of the audit committee’s investigation and the start of a formal investigation by the SEC.
“After the truth about the individual defendants’ misconduct emerged, there was an exodus of high-level company executives,” the lawsuit says.
Milliken is represented by Brian E. Farnan and Michael J. Farnan of Farnan LLP in Wilmington, Del., and of counsel: Phillip Kim of The Rosen Law Firm in New York and Timothy Brown of The Brown Law Firm in Oyster Bay, N.Y.