Mercury Execs Step Down

The Mountain View, Calif., maker of IT management and testing software said in a statement that CEO Amnon Landan, CFO Douglas Smith and general counsel Susan Skaer “were each aware of and, to varying degrees, participated in” 49 instances in which the date an option was granted differed from the intended date.

In nearly every case, between 1995 and the present, the stock option payout was higher than it officially should have been. Mercury&'s Special Committee said Landan, Smith and Skaer “benefited personally from the practices.”

Mercury&'s board appointed former President and COO Anthony Zingale to the CEO position in the wake of the resignations. David Murphy, Mercury senior vice president for corporate development, will take over as CFO.

A November 2004 inquiry by the Securities and Exchange Commission kicked the whole process into motion. The Special Committee that discovered the problems was formed in June 2005. Mercury spokeswoman Heather Sieberg declined further comment.

Several Mercury partners said the scandal is another unfortunate case of bad apples in big business. Brian Griffin, however, sees larger ramifications. Director of business development and strategic planning at Definitive Solutions Co., Cincinnati, Griffin said the shakeup, and resulting 33 percent drop in Mercury&'s stock price, makes the company ripe for acquisition. Calling Mercury “the gold standard” of performance and availability management software vendors, Griffin said, “You are never going to get them at a lower price.”

Mercury&'s future remains murky. The company will be forced to delay filing third-quarter results while it determines the impact of the option payouts, and certain executive loans from 1998, 1999 and 2001, on past financial statements. And Mercury could be delisted from the NASDAQ if it misses a Nov. 30 deadline to file its restated earnings. In a statement, the company said its ability to make that deadline “is in serious jeopardy.”