SEC/McAfee, Inc.(f/k/a Network Associates, Inc.) Fair Fund
SEC v. McAfee, Inc., C-06-0009 (PJH)(N.D. Cal.)

Welcome to the SEC/McAfee, Inc. Fair Fund Website

As set forth below, the SEC v. McAfee, Inc. Fair Fund is made up of payments to the Court by entities and individuals to settle SEC civil and administrative actions arising from McAfee, Inc.’s fraudulent scheme to overstate revenues and earnings from 1998 through 2000. The Distribution Agent was appointed by the Court to implement, in consultation with the Commission, the distribution of the Fair Fund to investors harmed by the scheme.

Background

On January 4, 2006, the Securities and Exchange Commission (the "Commission") filed a Complaint in the United States District Court for the Northern District of California (the "Court") against McAfee, Inc. (f/k/a Network Associates, Inc.) ("McAfee") alleging that from the second quarter of 1998 through 2000, McAfee defrauded investors by engaging in a scheme to overstate its revenue and earnings by hundreds of millions of dollars (SEC v. McAfee, Inc., C-06-0009 (PJH) (N.D. Cal.)). On February 9, 2006, the Court entered a Final Judgment against McAfee, to which McAfee consented without admitting or denying the allegations of the Complaint.

Pursuant to the Final Judgment, McAfee paid a total of $50,000,001 (disgorgement of $1 and a civil penalty of $50 million) to the Clerk of the Court. Those funds were thereafter deposited in an interest-bearing account with the Court Registry. On August 7, 2008, the Court authorized the Commission to establish a Fair Fund, pursuant to the provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002, composed of the funds deposited in the Court Registry account (the "Fair Fund"). On August 7, 2008, the Court also appointed Jeffrey Plotkin, Esq. of Day Pitney LLP as Distribution Agent to prepare and to implement, in consultation with the Commission, a plan for the distribution of the Fair Fund to investors harmed by the violations alleged in the Commission's Complaint. On March 3, 2009, the Court approved the Distribution Plan.

On May 15, 2009, the Court granted the SEC's motion to transfer an additional $15 million to the Fair Fund. Ingram Micro Inc. ("Ingram") agreed to pay that $15 million as disgorgement in connection with settled cease-and-desist proceedings brought by the SEC against Ingram relating to its alleged role in McAfee's alleged financial fraud during 1998 through 2000. Those additional monies increased the funds available for distribution to injured investors to approximately $65 million.

On January 13, 2010, the Court granted the SEC's motion to transfer an additional $1,347,563 million to the Fair Fund. This amount represented the total disgorgement, prejudgment interest, and civil penalty payments made by two former McAfee officers, Terry W. Davis and Eric G. Borrmann, in connection with their settlements of separate SEC civil actions relating to their alleged roles in McAfee's alleged financial fraud during 1998 through 2000. Those additional monies, plus accrued interest to the Fair Fund to date, increased the funds available for distribution to injured investors to approximately $67 million.

For eligibility in the Fair Fund, claimants (except for certain participants in a class action settlement identified below) must have submitted a completed Proof of Claim Form. Investors whose claims were previously approved in the class action entitled In re Network Associates, Inc. II Securities Litigation, Case No. CV-00-4849-MJJ (N.D. Cal.), were automatically deemed eligible claimants with respect to stock transactions for which a claim was previously approved in that class action. See Special Notice to Network Associates II Claimants for further information. The Distribution Plan Notice and the Distribution Plan described your rights. The deadline for receipt of Proof of Claim Forms by the Distribution Agent has now expired.

In September 2009, deficiency notices were mailed to claimants who submitted deficient Proof of Claim Forms. Claimants who received a deficiency notice had an opportunity to cure their deficient claims by submitting the additional documentation or other information required to substantiate their claims within twenty days of the date of such notice. Pursuant to his discretion under the Distribution Plan, the Distribution Agent accepted responses to deficiency notices that were received by November 2, 2009. Claimants who did not respond by that date and cure the deficiency identified had their claims rejected to the extent deficient.

The Distribution Agent completed his review of all timely received claims. On December 8, 2009, Claim Determination Notices were mailed to all claimants setting forth the Distribution Agent’s conclusions regarding their claims. The Distribution Agent's claim determinations were final and not subject to appeal. The specific distributable amount of the Fair Fund, the specific pro rata amount per share payable to each approved claimant, and the date for the Fund's primary distribution were later determined. All payments were subject to final Court approval.

On January 22, 2010, the Distribution Agent filed a motion with the Court seeking authority to distribute the Available Distribution from the Fair Fund in the amount of $67,230,000 to 16,183 Eligible Claimants on a pro rata basis calculated pursuant to Section 2.6 of the Distribution Plan, resulting in a distribution payment to Eligible Claimants of $1.00 per share for their Approved Claims. On January 29, 2010, the Court granted the motion. The Claims Administrator, at the direction of the Distribution Agent, commenced the distribution of payments to Eligible Claimants on February 19, 2010 and completed the distribution by February 23, 2010.

On December 15, 2010, the Distribution Agent filed a motion to amend the Distribution Plan in order to provide for a secondary distribution from the McAfee Fair Fund ("Motion to Amend Distribution Plan"). Counsel for the Commission concurred with the Distribution Agent's request. As set forth in the Motion to Amend Distribution Plan, following the initial distribution of funds in February 2010, the Distribution Agent and Claims Administrator made extensive efforts to complete the distribution of the Fair Fund to Eligible Claimants. As those efforts culminated, it was determined that sufficient funds remained to effect a meaningful secondary distribution in an estimated amount of approximately $1.9 million. The secondary distribution will proceed on a pro rata basis to Eligible Claimants who successfully received a distribution in the primary distribution from the McAfee Fair Fund and whose pro rata share in the secondary distribution will result in a payment equal to or in excess of a minimum distribution amount of ten dollars. The McAfee Motion to Amend Distribution Plan is here.

On December 21, 2010, the United States District Court granted the Distribution Agent's Motion to Amend Distribution Plan. The Court's Order is attached here.

On February 10, 2011, the Distribution Agent announced that the secondary distribution would be postponed pending the Fair Fund’s receipt of a federal income tax refund expected to supplement the funds available for distribution. The Distribution Agent, in consultation with the tax administrator for the Fair Fund, anticipated receipt of the tax refund by the summer of 2011.

Following receipt of the anticipated federal income tax refund, the Distribution Agent and Claims Administrator, in consultation with the Commission, prepared for the secondary distribution. The funds available for the secondary distribution were determined to be in excess of $2.1 million.

The Distribution Agent and Claims Administrator commenced the secondary distribution from the McAfee Fair Fund on August 9, 2011. The secondary distribution was in the amount of $2,138,382 to 6,294 qualified claimants.

If you have additional questions, please call 1(800) 893-4359 in the United States or send an email to Questions@McAfeeSECsettlement.com.

You can also visit the Securities and Exchange Commission's website by clicking here.