SEC drops backdating probe against former Pixar CFO

August 21, 2009: 03:18 PM ET

* SEC letter say won't recommend action against Mather

* Comes 16 months after SEC warned it might take action

By Gina Keating

LOS ANGELES (Reuters) - U.S. securities regulators
have dropped a stock options backdating investigation against
former Pixar Animation Studios Chief Financial Officer Ann
Mather, according to a letter obtained by Reuters Friday.

"This investigation has been completed as to Ann Mather,
against whom we do not intend to recommend any enforcement
action by the Commission," said the letter from the Los Angeles
office of the Securities and Exchange Commission.

The Aug. 10 letter to Mather's attorney Timothy Coleman was
obtained by Reuters from a person involved in the matter but
not authorized to provide the correspondence.

Mather's spokesman, Paul Kranhold, confirmed that Mather
had received the SEC letter but had no other comment. An SEC
spokesman in Washington D.C. declined to comment.

The reprieve comes 16 months after Mather, a Google Inc
board member, received a Wells notice from the SEC. A
Wells notice indicates SEC staff intends to recommend that
civil charges be brought, but gives the recipient a chance to
mount a defense.

Mather's attorney had denied at the time that she engaged
in any wrongdoing.

Options backdating, a practice in which option grant dates
are changed retroactively to allow recipients to reap greater
profit, is not illegal as long as it is properly disclosed and
accounted for in financial statements.

Pixar was among more than 200 companies that disclosed
internal audits or government probes surrounding options
practices.

Mather was the only Pixar executive who became a government
litigation target. A source familiar with the case said last
year that Mather was expected to argue that Pixar's board,
outside lawyers and auditors approved backdating long before
she was hired.

"She responded to the Wells notice and there was, over the
last year, quite a bit of communication with Commission staff
about her defense," a second source familiar with the case
said.

Pixar was bought in 2006 by the Walt Disney Co,
whose own audit found options backdating as early as 1997 but
cleared then-Chief Executive Steve Jobs and anyone associated
with the company of deliberate misconduct, a regulatory filing
showed. Jobs became Disney's largest individual shareholder and
a board member in the Pixar acquisition.

But Disney had to pay about $34 million to former Pixar
employees with backdated options to cover price discrepancies
and taxes. Backdating also was found at the company Jobs
co-founded, Apple Inc.

In addition to her Google directorship, Mather also serves
on the boards of Glu Mobile Inc, Central European
Media Enterprises Group, Zappos.com, and Ariat International
Inc.
(Reporting by Gina Keating; Editing by Tim Dobbyn)

http://money.cnn.com/news/newsfeeds/articles/reuters/MTFH57516_2009-08-21_19-18-03_N2170722.htm