Tom Siebel might have returned 26 million options to the company bearing his name, but the board's misguided generosity continues to haunt him.
A Superior Court judge in San Mateo County, Calif., this week ruled the
CEO and the company's directors could have to pay as much as $10 million in punitive damages for overpaying Siebel through allegedly undisclosed options grants.
In a suit filed in September 2002, the Teachers Retirement System of Louisiana alleged that Siebel's directors violated the company's rules by granting too many options and in some cases issuing them below market value without expensing the difference in price.
The suit is scheduled to go to trial in November.
Attorney Stuart Grant, who represents the pension fund, said the finding on punitive damages "puts Tom Siebel and others personally at risk and will likely be the thing that leads to a resolution of the case." Grant said he expects to seek punitive damages in the "eight-figure" range if he wins. The Delaware-based attorney made his remarks during an interview with the
Earlier this year, the struggling company canceled all of Tom Siebel's 26 million options (including many that were underwater) at his request. Siebel also voluntarily gave up his bonus and nearly all of his salary. He is now being paid $1 a year.
In a court hearing on Tuesday, Siebel's lawyers asked the judge to throw out the suit, saying shareholders had already received compensatory relief through the cancellation of Siebel's stock options.
A spokesman for Siebel called the lawsuit "frivolous" and said in a written statement: "The question of liability for punitive damages
or of liability at all has never been reviewed by the court, and the court has made no finding of liability against Mr. Siebel, the Siebel board of directors, or anyone else. Yesterday's ruling did not address the merits of the case. We continue to believe the plaintiff's claims are completely without merit."
The suit is one byproduct of shareholder anger over Siebel's drastic loss in value. After trading as high as high as $120 a share late in 2000, the stock has swooned as a drop in IT spending pummeled the market for enterprise software. In recent trading Friday, Siebel was off 9 cents, or about 1%, to $10.12.
Although Siebel is still a leading provider of customer relationship-management software, it has been losing market share to
and other competitors.