* From the third quarter of 2004 through the second quarter of 2005, SafeNet, through the actions of Mueller, Caputo, Greenman, Wilroy (after the third quarter of 2004), and Pasko, engaged in a scheme to meet or exceed quarterly earnings per share (EPS) targets through the use of improper accounting adjustments.

* During the relevant period, Caputo and Mueller were aware that SafeNet would be unable to meet its earnings targets through normal business operations, and in response, took actions to ensure that SafeNet would meet its earnings targets.

* At Mueller's direction, Greenman, Wilroy, and Pasko, made, or caused others to make, improper accounting adjustments to various expenses including the improper classification of ordinary operating expenses as non-recurring integration expenses (costs incurred to integrate acquired companies into current operations), and the improper reduction of accruals and reserves.

* SafeNet, Mueller, and Caputo represented to investors that SafeNet's non-GAAP earnings results excluded certain non-recurring expenses, when, in fact, SafeNet had misclassified and excluded a significant amount of recurring, operating expenses from its non-GAAP earnings results, in order to meet or exceed quarterly EPS targets.

* In the course of the earnings management scheme, Mueller, Caputo, Greenman, Wilroy, and Pasko prepared, reviewed, and/or signed SafeNet's materially false and misleading securities filings and press releases.

In addition, the complaint alleges that SafeNet, through the actions of three former officers, engaged in a scheme to backdate option grants to senior executives and employees in order to take advantage of low points in the company's stock price, without recording the requisite compensation expense for these option grants. According to the complaint:

* The three former officers who participated in the backdating of option grants were Caputo, Mueller, and Carole Argo, a former SafeNet President and CFO, who was convicted in a parallel criminal action and settled with the Commission in 2008. - * Argo, in consultation with Caputo, looked back and selected historical dates when SafeNet's stock price had closed at or near the low for a given period to use as grant dates for SafeNet option grants. By selecting these highly favorable dates and causing options to be granted on dates when they would be "in-the-money," Argo and Caputo created opportunities for themselves and others at SafeNet to reap substantial profits.

* Mueller became SafeNet's CFO in June 2004 and after learning of SafeNet's backdating practice, Mueller continued the backdating scheme by, among other actions, approving a highly favorable historical date to use as the grant date for option grants to himself and others.

* During the backdating scheme, Mueller, Caputo, and Argo prepared, reviewed and/or signed SafeNet's materially false and misleading securities filings and press releases.

* Argo, Caputo, and Mueller each benefited from the backdating scheme by receiving significant in-the-money option grants. Caputo and Mueller realized illicit profits of approximately $1.6 million and $80,000, respectively, from the sale of SafeNet stock obtained from the exercise of backdated option grants.

All defendants have agreed to settle this matter, without admitting or denying the allegations in the complaint, on the following terms:

* SafeNet consented to the entry of a judgment: permanently enjoining it from violating the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, the rule relating to the use of non-GAAP financial measures of Regulation G, the reporting, books and records and internal controls provisions, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 13a-11, and 13a-13, and the proxy solicitation provisions, Section 14(a) of the Exchange Act and Exchange Act Rule 14a-9; and ordering SafeNet to pay a civil penalty of $1,000,000.

* Mueller consented to the entry of a judgment: (a) permanently enjoining him from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5, the internal controls and books and records provisions of Section 13(b)(5) of the Exchange Act and Exchange Act Rule 13b2-1, the misrepresentations to auditors provision of Exchange Act Rule 13b2-2, the ownership reporting provisions of Section 16(a) of the Exchange Act and Exchange Act Rule 16a-3, the proxy solicitation provisions of Section 14(a) of the Exchange Act and Exchange Act Rule 14a-9, the certification provision of Exchange Act Rule 13a-14, and Regulation G, and from aiding and abetting violations of the reporting, books and records, and internal controls provisions; (b) finding him liable for disgorgement of $78,250 plus prejudgment interest of $21,349, but after taking into account his previous settlement with SafeNet, ordering him to pay $37,000 plus prejudgment interest of $13,561; (c) ordering him to pay a civil penalty of $75,000; and (d) barring him from acting as an officer or director of a public company for a period five years.

* Caputo consented to the entry of a judgment permanently enjoining him from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act, Sections 13(b)(5), 14(a), and 16(a) of the Exchange Act, Exchange Act Rules 13a-14, 13b2-1, 13b2-2, 14a-9, and16a-3, and Regulation G, and from aiding and abetting violations of the reporting, books and records, and internal controls provisions; finding him liable for disgorgement of $1,690,000 plus prejudgment interest of $214,000, but deeming these amounts to be fully satisfied by Caputo's previous settlement with SafeNet; and ordering him to pay a civil penalty of $250,000.

* Greenman, Wilroy, and Pasko each consented to the entry of judgments permanently enjoining them from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act and Exchange Act Rules 13b2-1 and 13b2-2, and from aiding and abetting violations of the reporting, books and records, and internal controls provisions. Greenman consented to a judgment finding him liable to pay disgorgement of $45,000 plus prejudgment interest, but based on his sworn financial statements and other documents submitted to the Commission, waiving disgorgement, except for $15,000, and not imposing a civil penalty. Wilroy and Pasko consented to judgments ordering them to pay civil penalties of $25,000 and $15,000 respectively.

* In addition, Mueller, Greenman, Wilroy, and Pasko each consented to the issuance of administrative orders suspending them from appearing or practicing before the Commission as accountants, with the right to apply for reinstatement after (i) five years for Mueller, (ii) two years for Greenman and Wilroy, and (iii) one year for Pasko.

The settlements with SafeNet, Greenman, and Pasko take into account the cooperation with the SEC's investigation by SafeNet and these individuals. All of the settlements of the civil action are subject to the approval of the United States District Court for the District of Columbia.

The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of New York and the United States Postal Inspection Service. For additional information, please see Litigation Release Nos. 20752 (Sept. 29, 2008) and 20221 (Aug. 1, 2007). [SEC v. SafeNet, Inc., et al., United States District Court for the District of Columbia, Civil Action No. 09-2117 (RWR), D.D.C] (LR-21290; AAE Rel. 3068)

"As an industry leading security package, SafeNet will provide our customers with a high performance IPsec software toolkit optimized for the OCTEON architecture of our packet processors," said Ian MacMillan, Senior Product Marketing Manager at Interphase.

Product features, the company said, include:

- New generation of convergent broadband solutions based on 3G/4G technologies (LTE, ASN Gateways / WiMax, Femtocell, IMS)

- High-performance security appliances such as Wireless LAN Gateways, VPN Gateways, and Session Border Controllers

- Line-rate packet processing with content inspection (deep packet inspection) for solutions such as load balancers, routers, and gateways

"SafeNet continues to support our customers with this convenient and effective pre-integrated solution. The reliability and processing power of the Interphase OCTEON-based cards plus the easily integrated advanced security features of our QuickSec 5.0 enable network equipment vendors to efficiently add best-in-class security - faster, cheaper, and more secure than any in-house solutions," said Simon Blake-Wilson, Managing Director, Embedded Security Solutions at SafeNet.

More Information:

www.iphase.com

www.safenet-inc.com

((Comments on this story may be sent to newsdesk@closeupmedia.com))

Carriers are extremely demanding customers as a result of large established customer bases, the quality of service requirements imposed by corporate customers, experience dealing with the pain of service disruption and customer service issues, and market dynamics demanding a combination of rapid introduction of new services and careful cost management. QuickSec 5.0 has been designed with the needs of carrier applications like Femtocell, IMS, mobile TV, and VoIP in areas like:

- Performance - highly optimized software supporting the latest hardware, including Cavium OCTEON chips and multi-core processors.

- Interoperability - exhaustively tested through industry certifications such as ICSA, TAHI, and VPNC.

- Latest standards - for example, multiple authentication support within IKE as required by the latest Femtocell specifications.

- Code quality and documentation - well-tested source code that has passed thousands of test cases before release, as well as documentation, including one-thousand five hundred pages of reference manuals.

((Comments on this story may be sent to newsdesk@closeupmedia.com))

"As an industry leading security package, SafeNet will provide our customers with a high performance IPsec software toolkit optimized for the OCTEON architecture of our packet processors," said Ian MacMillan, Senior Product Marketing Manager at Interphase. Customers will value this combined security solution for its ability to decrease their time to market and maximize throughput for applications such as:

-- New generation of convergent broadband solutions based on 3G/4G technologies (LTE, ASN Gateways / WiMax, Femtocell, IMS)

-- High-performance security appliances such as Wireless LAN Gateways, VPN Gateways, and Session Border Controllers

-- Line-rate packet processing with content inspection (deep packet inspection) for solutions such as load balancers, routers, and gateways

"SafeNet continues to support our customers with this convenient and effective pre-integrated solution. The reliability and processing power of the Interphase OCTEON-based cards plus the easily integrated advanced security features of our QuickSec 5.0 enable network equipment vendors to efficiently add best-in-class security -- faster, cheaper, and more secure than any in-house solutions," stated Simon Blake-Wilson, Managing Director, Embedded Security Solutions at SafeNet.

Interphase and SafeNet are exhibiting together at the AdvancedTCA Summit, October 27-29, at the Santa Clara Convention Center in Santa Clara, California, Booth number 401.

Interphase and SafeNet extend an open invitation to a live Webinar:

Enabling Effective IPsec Security for High-Demand Gateway
Applications
Getting ATCA-based high-demand applications to exploit
essential components for real-time security from both a hardware
and software perspective
In this webinar, SafeNet and Interphase will address the security
issues arising from the growth of real-time data traffic over
converged communications networks now and in the near future and
will present solutions to gracefully and effectively handle these
threats and the extra real-time work load that requires.
Date: Tuesday November 10, 2009
Time: 2:00 PM to 3:30 PM - Eastern Time
To register, visit: http://events.meetingbridge.com/Register/?EventCode=06123128991

About Interphase Corporation

Interphase Corporation (NASDAQ: INPH) delivers solutions for network connectivity, interworking, and packet processing for key applications for the communications, Mil/Aero, and enterprise markets. Founded in 1974, Interphase provides expert customization services and contract manufacturing, in addition to its COTS portfolio, and plays a leadership role in next generation AdvancedTCA(R) (ATCA), AdvancedMC(TM) (AMC), PCI-X, and PCIe standards and solutions. Interphase is headquartered in Plano, Texas, with sales offices across the globe. Clients include Alcatel-Lucent, Emerson Network Power, Fujitsu Ltd., Hewlett Packard, Nokia-Siemens Networks, Samsung, and Sun Microsystems. Visit www.iphase.com.

About SafeNet

SafeNet Inc., a global leader in information security was founded more than 25 years ago. The company specializes in encryption technology solutions to protect communications, intellectual property and digital identities for enterprises and government organizations. SafeNet's software protection, licensing and authentication solutions protect companies' information, assets and employees from piracy and fraud. The Company has more than 25,000 customers in 100 countries around the globe. For more information, visit www.safenet-inc.com.

Interphase and iSPAN are trademarks or registered trademarks of Interphase Corporation. All other trademarks are the property of their respective owners.

SOURCE: Interphase Corporation

Interphase Corporation 
PR Contact: 
Julie Parenzan, 214-654-5000 
pr@iphase.com 
or 
Investor Contact: 
Joseph Hassett, 866-630-INPH 
ir@iphase.com