Tom Siebel and his board of directors can be held liable for punitive damages if a shareholder lawsuit can prove allegations that insiders improperly looted stock options from the software firm following a landmark ruling in the US.
A California judge cleared the way for punitive damages against the Siebel CEO and members of hiss board if they are found liable for overpaying Siebel through undisclosed stock option grants. San Mateo County Superior Court Judge Quentin Kopp cleared the way for the Teachers Retirement System of Louisiana to continue to pursue its lawsuit against the software maker and to seek punitive damages if it wins.
The Teachers Retirement System has alleged in its lawsuit that Siebel directors violated the company's rules for granting options, both by exceeding the cap set on the number of options it was allowed to grant, and in some cases issuing options at below market value without expensing the difference in price.
The lawsuit further alleges that two separate proxy statements issued by Siebel understated the number of options granted to Tom Siebel and failed to disclose grants to directors, who include Charles Schwab, founder and chairman of The Charles Schwab Corp, and Google Inc CEO Eric Schmidt.
Attorney Stuart Grant, who represents the pension fund, said that in the event of a win he would likely seek punitive damages in the "eight-figure" range. In retaliation, Siebel said in a statement that Grant & Eisenhofer is engaged in a "continuing attempt to exact excessive 'legal fees' from Siebel Systems in consideration for their dropping this frivolous lawsuit."
The case is scheduled for trial on 3rd November.