Back in 2008, I noted the use of what was then a fairly novel tactic in the defense of an SEC case. Frank McPike, former interim CEO of a company called Competitive Technologies, had reached an agreement in the SEC's case against him for allegedly participating in a scheme to manipulate the stock price of CT. Under the agreement, McPike settled the SEC's case against him with the exception of the demand for an officer and director bar, which he chose to litigate. McPike ultimately prevailed on this issue in April 2008 when the court declined to impose a bar. McPike's attorney, John Sten, stated at the time that the case "provides a new avenue for reaching settlements with the SEC.” 

In June 2009, this tactic was tried by another defendant, but this time without success. Richard Selden, the former CEO of Transkaryotic Therapies, was sued by the SEC for allegedly making misleading statements about the company's flagship drug. He settled most of the SEC's case against him by agreeing to an injunction to pay a $125,000 civil penalty and $1,041,417 in disgorgement and prejudgment interest related to his sales of TKT stock, but chose to litigate the SEC's demand for an officer and director bar against him. On June 24, 2009, a court ruled against Selden, finding him "presently unfit to serve as an officer or director of a public company" and barring him from acting in such a role for two years.

I had not seen any more of these "Settle the Case, Litigate the O&D Bar" matters until this week, when I learned of the defendant's victory in SEC v. Schroeder (via theRacetotheBottom). In the Schroeder case, Kenneth Schroeder, the CEO of KLA-Tenor Corporation, settled the SEC's allegations that he illegally backdated stock options in 2005, but did not agree to the SEC's demand for an O&D bar. On November 17, 2010, Schroeder prevailed on this point when the court denied the SEC's Motion for an Order Barring Defendant from Serving as an Officer or Director of a Public Company.

As summarized by theRacetotheBottom, 

the court held that the SEC had not proven that Schroeder's degree of scienter, or intent or knowledge of wrongdoing, was enough to impose a director bar. In addition, the court commented that Schroeder had not been able to obtain regular employment since KLA had made the allegations against Schroeder public in 2006, and as a result he had been “effectively barred from his profession for four years.

The court denied the SEC's motion, so I believe the current tally in these case is now:

Defendants 2

SEC 1

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