JEREMY E. PENDREY (Cal. Bar No. 1 87075)

MARC J. FAGEL (Cal. Bar No. 154425) 
ROBERT S. LEACH (Cal. Bar No. 196191) 
[email protected] 
JEREMY E. PENDREY (Cal. Bar No. 1 87075) 
[email protected] 
Attorneys for Plaintiff 
SECURITIES 
AND EXCHANGE COMMISSION 
44 Montgomery Street, Suite 2600 
San Francisco, California 941 04 
1 
Telephone:  (41 5) 705-2500 
Facsimile:  (41 5) 705-2501 
E-filing 
UNITED STATES DISTRICT COURT 
91 
NORTHERN DISTRICT OF CALIFORNIA 
S, JOSE DIVIC 
v. I COMPLAINT 
12 
13 
15 JUNIPER NETWORKS, INC., 
I1 
l8 II 
Plaintiff Securities and Exchange Commission (the "Commission") alleges: 
SECURITIES 
AND EXCHANGE COMMISSION, 
Plaintiff, 
l9 11 
SUMMARY OF THE ACTION 
Civil Action No. 
RS 
2o "I 
1. 
From mid-1 999 through mid-2003, Juniper Networks, Inc. ("Juniper" or the 
21 "Company"), a Sunnyvale, California company that sells Internet Protocol networking solutions, 
I1 
22 I1 
concealed hundreds of millions of dollars in expenses £tom investors, and significantly overstated the 
23 
11 Company's  income, by backdating employee stock option grants and failing to properly disclose and 
24 
11 account for its true compensation expenses. 
25 I 
2. Under well-settled accounting principles in effect throughout the relevant period, 
26 
11 Juniper was not required to record an expense in its financial statements for options granted to 
27 
1 employees at the market price ("at-the-money"), but was required to record expenses for any options 
28 
11 granted below the current'market price ("in-the-money"). To help Juniper attract and retain 
CO~~~PLAINT 1 

executives and employees with potentially far more lucrative "in-the-money" options, without 
disclosing to shareholders hundreds of millions of dollars in compensation expenses, Juniper 
established a scheme to grant in-the-money options whle 
falsifying records to make it appear that the 
options had been granted at-the-money. 
3. 
By using option grant dates and exercise prices selected with hindsight, Juniper 
materially understated its expenses, overstated its income (or understated its losses), and falsely 
represented in certain Commission filings that Juniper had incurred no expense for option grants. 
The Commission seeks an order enjoining Juniper fkom future violations of the securities laws, and 
providing other appropriate relief. 
JURISDICTION AND VENUE 
4. 
The Commission brings this action pursuant to Section 20(b) and 20(d) of the 
Securities Act of  1933 ("Securities Act") [15 U.S.C. 977t(b) and 77t(d)] and Sections 21(d) and 
21(e) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. @78u(d) and 78u(e)]. 
5. 
This Court has jurisdiction over this action pursuant to Sections 20(b) and 22(a) of the 
Securities Act [15 U.S.C. $77t(b) and 77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act 
[15 U.S.C. $78u(d), 78u(e), and 78aal. 
6. Juniper, directly or indirectly, made use of the means or instrumentalities of interstate 
commerce, or of the mails, or of the facilities of a national securities exchange in connection with the 
transactions, acts, practices, and courses of business alleged herein. 
7. 
This Court is a proper venue for this action pursuant to Section 22 of the Securities 
Act [15 U.S.C. 
9 77~1, and Section 27 of the Exchange Act 115 U.S.C. 9 77aaI because acts, 
transactions, practices, and courses of business constituting the violations alleged in this Complaint 
occurred within this district. 
INTRADISTRICT ASSIGNMENT 
8. Intradistrict assignment to the San Jose Division is proper pursuant to Civil Local Rule 
3-2(c) and (d) because acts or omissions giving rise to the Commission's claims occurred, among 
other places, in Santa Clara County, California. 
COMPLAINT 

DEFENDANT 
9. 
Juniper is a Delaware corporation headquartered in Sunnyvale, California that makes 
and sells intemet-related networking products.  From June 1999 through the present, Juniper's 
common stock has been registered under Section 12 of the Exchange Act and traded on the NASDAQ 
National Market. At all times relevant to this action, Juniper used a fiscal year ending on December 
3 1. 
FACTUAL ALLEGATIONS 
Juniper's Stock Option Disclosures 
10. On June 24, 1999, Juniper became a public company through an initial public offering 
of its stock (an 
"IPO). Juniper grew rapidly following its IPO, hiring hundreds of employees 
through early June 2003.  To support this rapid growth and to achieve its recruiting and compensation 
objectives, Juniper relied heavily on stock options as a recruiting and retention incentive. 
11. Each option gave the grantee the right to buy Juniper common stock fiom the 
Company at set price, called the "exercise" or "strike" price, on a future date after the option vested. 
The option was "in-the-money"  when granted if the trading price of Juniper's  common stock 
exceeded the option's exercise price.  The option was "at-the-money" when granted if the trading 
price of Juniper's common stock and the exercise price were the same. 
12. 
By compensating employees with stock options, Juniper avoided paying greater 
salaries or other forms of compensation that would have been necessary to attract and retain 
employees. Juniper granted stock options to nearly all new full-time employees. Juniper also granted 
options to existing Juniper employees (called "ongoing" options), based on performance or other 
factors. 
13. As a public company, Juniper filed annual reports on Forms 10-K with the 
Commission that included audited financial statements, certified by the companies outside auditors. 
14. 
Juniper publicly represented, in audited financial statements and other filings with the 
Commission made for or during its fiscal years  1999 through 2005, that its stock option grants were 
made at fair market value. 
In particular, Juniper stated in its annual reports to shareholders filed with 
the Commission on Forms 10-K for its fiscal years 1999 through 2005:  "Incentive stock options are 
COMPLAINT 3 

granted at an exercise price of not less than the fair value per share of the common stock on the date 
of grant." Juniper further stated in each of those reports on Forms 10-K that, although the Company's 
plans allowed for the granting of so-called "nonstatutory" stock options at 
an exercise price of not 
less than 85 percent of the then-market value, "no nonstatutory stock options have been granted for 
less than fair market value on the date of the grant." 
15. Juniper's public filings also affirmatively stated that the Company accounted for its 
employee stock option plans in accordance with 
GAAP, and particularly, that the Company followed 
Accounting Principles Board's Opinion No.  25, "Accounting for Stock Issued to Employees" ("APB 
25"). Under APB 25 and the accounting rules 
in effect during the relevant period, the Company was 
required to record an expense on its financial statements for the in-the-money portion of any options 
grant.  According to APB 25, that difference between the exercise price (if lower) and the quoted 
market price on the date of the actual grant must be recorded as compensation expense to be 
recognized over the vesting period of the option. Consequently, granting in-the-money options to 
employees could have a significant impact on the expenses and income (or loss) reported to the 
shareholders of a public company. 
16. APB 25 allowed a public company, where the key terms of an option grant were 
known, to grant employee stock options without recording any compensation expense so long as the 
option exercise price was not below the market price of the company's stock on the date of the grant. 
In each of its Forms 10-K filed with the Commission for fiscal years  1999 through 2005, Juniper 
represented that it had "elected to follow APB 25," and that "[b]ecause the exercise price of the 
Company's stock options equals the market price of the underlying stock on the date of grant, no 
compensation expense is recognized." 
17. Juniper also sent to shareholders proxy statements announcing its annual meetings of 
shareholders for 2000 through 2003, filed with the Commission on April 13,2000, March 28,2001, 
April 11,2002, and March 28,2003. The proxy statements for 2000,2001, and 2003, in describing 
zxecutive compensation and particularly options granted to officers, represented that "options are 
granted at fair market value on the date of grant." Similarly, the 2002 proxy statement, in responding 
to  a shareholder proposal regarding the Company's repricing (or regranting) of stock options, 
:OMPLAINT 4 

represented that employees at Juniper who have been avyarded stock options "have a right to purchase 
stock in the future at a price which is the fair market value on the date of the stock option grant." 
The Scheme to Backdate Option Grants 
18. On July 2 1, 1999, Juniper's Board of Directors created a three-member Stock Option 
Committee ("Stock Option Committee") consisting of Juniper executives, to which it delegated 
authority to grant stock options to Juniper's non-executive employees.  One purpose in creating the 
Stock Option Committee was to enable Juniper to have more flexibility in granting options.  The 
' 
Stock Option Committee held few, if any, actual meetings. 
19. From mid-1999 to mid-2003, a Juniper executive, who has since left the Company, 
unilaterally determined with hindsight the date for most Juniper stock option grants. 
In addition, the 
executive routinely created backdated "minutes" for Stock Option Committee meetings that never 
occurred. 
Juniper Backdated New Hire Stock Option Grants 
20. Beginning in the second half of 1999, the Juniper executive routinely prepared 
backdated stock option grants to issue options to groups of recently hired employees of Juniper. For 
these new hire grants, the executive collected the names of recently hired employees and had lists 
prepared. The executive then selected as the exercise price of the new hire grants the closing price of 
Juniper's  stock on a date in the past, reflecting the low closing price during a particular period around 
the time the employees were hired. For each backdated grant fkom 1999 through 2003, the executive 
then created Stock Option Committee meeting "minutes" that falsely stated that the Stock Option 
Committee had met on the date of the low closing price and granted options on that date. 
21. The executive signed the backdated committee "minutes" as a Stock Option 
Committee member. 
In addition, for each backdated grant the executive either presented the minutes 
to  the other Stock Option Committee members for signature or stamped the minutes with a signature 
stamp the executive maintained bearing the other Stock Option Committee members'  signatures. 
22. Once the executive selected a backdated grant date and a corresponding exercise price, 
the executive informed Juniper's  stock administrator, who then entered the grants into Juniper's  stock 

option tracking software using the backdated date as the grant date. Juniper did not reflect in its 
books an expense related to the in-the-money portion of the options. 
23. 
For example, Juniper granted options to six new Juniper employees on the purported, 
but false, grant date of October 27, 1999. The six employees were hired on Monday, October 25, 
1999, at which time Juniper's  stock traded at $257.75. Juniper's  stock price dipped to a low of 
$249.94 on Wednesday, October 27, then rose to $275.63 by the end of the week. The Juniper 
executive actually selected the grant date in mid-November 1999, when Juniper's stock was trading 
around $283.50, using information about Juniper's historical closing prices for its stock during the 
week the employees were hired. 
24. 
Similarly, Juniper granted stock options to employees hired between October 8,2002 
through January 2,2003, using the backdated January 2,2003 closing price of $7.36 as the purported 
"fair market value" of the stock on the grant date.  The Stock Option Committee never met  on 
January 2,2003. Instead, during mid-February, when Juniper's stock was 'trading around $9 per 
share, the executive selected that earlier January 2 date. The January 2,2003 closing price for 
Juniper's  stock, $7.36, used as the exercise price, was Juniper's lowest closing price of the year up to 
the time the executive selected the grant date. 
25. 
Using dates selected with hindsight between mid-June 1999 through the end of May 
2003, the Juniper executive backdated more than 50 grants to groups of new employees. More than 
$300 million in expenses associated with the in-the-money portion of those grants were not disclosed 
by Juniper as a consequence of the scheme. 
Juniper Backdated "Ongoing" Stock Option Grants 
26. 
From mid-1 999 through mid-2003, Juniper also backdated performance-related grants 
to  existing employees and officers, which Juniper called "ongoing" grants. Juniper thus backdated 
large grants to officers and employees that were made to create retention and performance incentives 
(and which at times included new hires), on approximately nine occasions. 
27. For instance, Juniper granted options to a large group of existing employees and 
officers (and to certain new hires), which it called an "evergreen" grant, using the backdated grant 
date of October 4,  1999.  The Stock Option Committee did not meet on October 
4, 1999, and no one 
COMPLAINT 6 

determined to grant the employees and officers options that day. Instead, on November 5,  1999, 
when Juniper's stock price traded at $273.13, the Juniper executive created Stock Option Committee 
meeting minutes dated October 4, 1999, when Juniper's stock priced closed at $182.13 
- the lowest 
price of that quarter to date. The executive subsequently caused Juniper's Board of Directors to be 
falsely informed that the grant had been made on October 4,1999. More than $100 million in 
expenses associated with the in-the-money portion of this "evergreen" grant were not disclosed by 
Juniper. 
28. 
On occasion, Juniper granted "pools" of stock options to certain business units to be 
awarded to employees based on the discretion of the business unit manager. On seven different 
occasions between 2000 and 2003, Juniper backdated "pool" grants (which also included certain 
grants to new hires).  More than $200 million in expenses associated with the in-the-money portion of 
these "pool" grants were not disclosed by Juniper. 
29. 
For example, Juniper granted options to existing employees and senior executives (as 
well as some new hires) in one such "pool" grant, using the backdated grant date of December 21, 
2000. Juniper's stock price closed at $93.94 on December 21,2000, which was the lowest stock price 
of the six months up to that date. No Stock Option Committee meeting occurred on that date.  The 
grant was actually made in or around early January 2001, when Juniper's stock price was trading over 
$100 per share. 
30. 
In the spring of 2001, Juniper's stock price had declined substantially from the levels 
experienced during 1999 and 2000.  Consequently, many options awarded during those earlier years 
had strike prices well above the then-current stock price (known as "underwater" options). 
3 1. In approximately April 2001, Juniper instituted a program to award additional options 
to  existing employees using a formula based on the number of underwater options each employee 
then had, and the length of time each had been employed 
by Juniper.  As part of the program, Juniper 
granted one block of this "formula" grant using as the grant date April 4,2001, when Juniper's stock 
price closed at $29.19.  The Juniper executive caused the grant to be backdated to April 
4, selecting 
that date with hindsight on or about April 19,2001, when Juniper's stock price had more than 
doubled to $65.58. 
COMPLAINT 7 

Juniper Falsely Reported Its Financial Results 
32. As a public company, Juniper filed with the Commission annual reports on Form  10-K 
that included the audited financial statements, certified by the companies'  outside auditors, which 
falsely represented Juniper's financial results. Due to Juniper's failure to record an expense for in- 
the-money options, Juniper's financial statements were materially misstated in each fiscal year fiom 
1999 through 2005. 
33. For example, for its fiscal year 2001, Juniper originally reported a loss of $13.4 
million.  However, after the company ultimately recorded a compensation expense for previously 
undisclosed in-the-money option grants in restated financials for this period, the Company reported 
an additional expense of $5 13.1 million, which (after adjusting for taxes) brought Juniper's loss for 
the year to $501.5 million. 
34. Similarly, for its fiscal year 2003, Juniper originally reported net income of $39.2 
million, representing the Company's first profitable year ever. As a result of Juniper's failure to 
record a compensation expense for backdated, in-the-money option grants, Juniper's  pre-tax income 
was reduced by $19.3 million, which, after adjusting for taxes, reduced its net income to $30.7 
million for the year, a profit reduction of 21.68%. 
35. Juniper also publicly announced quarterly financial results, which were described in 
financial statements included 
in quarterly reports filed with the Commission on Forms 1 0-Q, that 
were materially false and misleading due to Juniper's failure to record compensation expenses 
associated with in-the-money options. Thus, Juniper's quarterly reports filed on Forms 10-Q 
beginning with the quarter ended September 30, 1999, and for each of the Company's first three 
quarters in fiscal years 2000 through 2002, and the first two quarters of fiscal year 2003, contained 
materially false and misleading financial statements. 
36. Juniper filed with the Commission current reports on Forms 
8-K on April 10,2003, 
July 10,2003 and October 9,2003, each of which included announcements about the Company's 
financial results for prior quarters that were materially false and misleading due to Juniper's  failure to 
record compensation expenses associated with undisclosed grants of in-the-money stock options. 
COMPLAINT 8 

37. Juniper filed with the Commission registration statements on Form S-8 on March 14, 
2000, August 18,2000, December 12,2000, March 29,2001, December 21,2001, July 9,2002, April 
21,2004, August 18,2004, May 3,2005, May 4,2005, July 6,2005 and March 7,2006, each of 
which incorporated by reference false and misleading periodic reports. 
38. 
In May 2006, the audit committee of Juniper's board of director's began to investigate 
the Company's historical options granting practices.  As a result of the audit committee investigation, 
Juniper announced in March 2007 restated financial results to record expenses for options granted to 
employees. Juniper announced the recording of additional pre-tax, non-cash, stock-based 
compensation expense of $894.7 million for fiscal years 1999 through 2005 under 
APB 25. 
FIRST CLAIM FOR RELIEF 
Violations of Exchange Act Section 10(b) and Rule lob-5 Thereunder 
39. 
The Commission realleges and incorporates by reference paragraphs 1 through 38 
above. 
40. By engaging in the conduct described above, Juniper, directly or indirectly, in 
connection with the purchase or sale of securities, by the use of means or instrumentalities of 
interstate commerce, or the mails, with scienter: 
a. Employed devices, schemes, or artifices to defi-aud; 
b. Made untrue statements of material facts or omitted to state material facts 
necessary in order to make the statements made, in the light of the circumstances 
under which they were made, not misleading; and 
c.   Engaged 
in acts, practices, or courses of business which operated or would operate 
as a fraud or deceit upon other persons, including purchasers and sellers of 
securities. 
41. By reason of the foregoing, Juniper has violated and, unless restrained and enjoined, 
will continue to violate Section lo@) of the Exchange Act [15 U.S.C. 
5 78j@)] and Rule lob-5 [17 
C.F.R. $240.10b-51. 
COMPLAINT 

SECOND CLAIM FOR RELIEF 
Violations of Securities Act Section 17(a)(l) 
42. 
The Commission realleges and incorporates by reference Paragraphs 1 through 38 
above. 
43. 
By engaging in the conduct described above, Juniper, directly or indirectly, in the offer 
or  sale of securities, by use of the means or instruments of transportation or communication in 
interstate commerce or by use of the mails, with scienter, employed devices, schemes, or artifices to 
defkaud. 
44. By reason of the foregoing, Juniper violated and, unless restrained and enjoined, will 
continue to violate Section 17(a)(l) of the Securities Act [15 U.S.C. 
§ 77q(a)]. 
THIRD CLAIM FOR RELIEF 
Violations of Securities Act Sections 17(a)(2) and (3) 
45. 
The Commission realleges and incorporates by reference Paragraphs 1 through 38 
above. 
46. By engaging in the conduct described above, Juniper, directly or indirectly, in the offer 
or sale of securities, by use of the means or instruments of transportation or communication in 
interstate commerce or by use of the mails: 
a. Obtained money or property by means of untrue statements of material fact or by 
omitting to state a material fact necessary in order to make the statements made, in 
light of the circumstances under which they were made, not misleading; and 
b. Engaged 
in transactions, practices, or courses of business which operated or would 
operate as a fiaud or deceit upon the purchasers. 
47. By reason of the foregoing, Juniper has violated and, unless restrained and enjoined, 
will continue to violate Sections 17(a)(2) and (3) of the Securities Act  [15 U.S.C. 
$ 77q(a)(2) and 
(31- 
COMPLAINT 

FOURTH CLAIM FOR RELIEF 
Violations of Exchange Act Section 13(a) and Rules 12b-20,13a-1,13a-l1, 
and 13a-13 Thereunder 
48. The Commission realleges and incorporates by reference Paragraphs 1 through 38 
above. 
49. 
Based on the conduct alleged above, Juniper violated Section 13(a) of the Exchange 
Act [15 U.S.C. 
78m(a)] and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder 117 C.F.R. 
$$ 
240.12b-20,240.13a- 1,240.13a-11, and 240.13a-131, which obligate issuers of securities registered 
pursuant to Section 12 of the Exchange Act [15 U.S.C. 784 to file with the Commission accurate 
periodic reports, including annual, current, and quarterly reports.  Unless restrained and enjoined, 
Juniper will continue to violatesection 13(a) of the Exchange Act [15 U.S.C. $ 78m(a)] and Rules 
12b-20, 13a-1, 13a-11, and l'3a-13 thereunder [17 C.F.R. 
§§ 240.12b-20,240.13a-1,240.13a-11, and 
240.13a-131. 
FIFTH CLAIM FOR RELIEF 
Violations of Exchange Act Section 13@)(2)(A) 
50. 
The Commission realleges and incorporates by reference Paragraphs 1 through 38 
above. 
5 1. 
Based on the conduct alleged above, Juniper violated Section 13(b)(2)(A) of the 
Exchange Act [15 U.S.C. 
§ 78m(b)(2)(A)], which obligates issuers of securities registered pursuant to 
Section 
12 of the Exchange Act [15 U.S.C. 784 to make and keep books, records and accounts 
which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets 
of the issuer.  Unless restrained and enjoined, Juniper will continue to violate Section 13(b)(2)(A) of 
the Exchange Act  [15 U.S.C. 
78m(b)(2)(A)]. 
SIXTH CLAIM FOR RELIEF 
Violations of Exchange Act Section 13@)(2)(B) 
52. 
The Commission realleges and incorporates by reference Paragraphs 1 through 38 
above. 

53. Based on the conduct alleged above, Juniper violated Section 13(b)(2)@) of the 
Exchange Act 115 U.S.C. 78m(b)(2)(B)I7 which obligates issuers of securities registered pursuant to 
Section 12 of the Exchange Act [15 U.S.C. 
5 784 to devise and maintain a sufficient system of 
internal accounting controls.  Unless restrained and enjoined, Juniper will continue to violate 
13(b)(2)@) of the Exchange Act [15 U.S.C. 
5 78m(b)(2)(B)]. 
SEVENTH CLAIM FOR RELIEF 
Violations 
of Exchange Act Section 14(a) and Rule 14a-9 thereunder 
54. 
The Commission realleges and incorporates by reference Paragraphs 1 through 38 
above. 
55. 
Based on the conduct alleged above, Juniper violated Section 14(a) of the Exchange 
Act [15 U.S.C. 
5 78n(a)] and Rule 14a-9 thereunder 117 C.F.R. 8 240.14a-91, which prohibits 
solicitations by means of a proxy statement, form of proxy, notice of meeting or other 
communication, written or oral, that contains a statement which, at the time and in the light of the 
circumstances under which it was made, was false or misleading with respect to any material fact, or 
which omits to state any material fact necessary in order to make the statements therein not false or 
misleading or necessary to correct any statement in any earlier communication with respect to the 
solicitation of a proxy for the same meeting or subject matter which had become false or misleading. 
Unless restrained and enjoined, Juniper will continue to violate Section 14(a) of the Exchange Act 
[15 U.S.C. 
5 78n(a)] and Rule 14a-9 thereunder [17 C.F.R. 8 240.14a-91. 
PRAYER FOR RELIEF 
WHEREFORE, the Commission respectfully requests that this Court: 
I. 
Permanently enjoin Juniper from directly or indirectly violating Section 17(a) of the Securities 
Act [15 U.S.C. 
5 77q(a)] and Sections 1 O(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the 
Exchange Act [15 U.S.C. 
$8 78j(b), 78m(a), 78m(b)(2)(A), 78m(b)(2)@) and 78n(a)], and Rules 
lob-5, 12b-20, 13a-1, 13a-11, 13a-13, and 14a-9 [17 C.F.R. 
$8 240.10b-5,240.12b-20,240.13a-1, 
240.13a-11,240.13a-13, and 240.14a-91 thereunder; 
COMPLAINT 12 

Retain jurisdiction of this action in accordance with the principles of equity and the Federal 
Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that 
may be entered, or to entertain any suitable application or motion for additional relief within the 
jurisdiction of this Court; and 
111. 
Grant such other relief as this Court may deem just and appropriate. 
, . 
Dated: ~u~ust 2007 
ReeAll;b7;d,,u 
y E. Pendrey 
~6orne~s for Plaintiff 
SECURITIES 
AND EXCHANGE COMMISSION 
COMPLAINT 

MARC J. FAGEL (Cal. Bar No. 154425) 
ROBERT S. LEACH (Cal. Bar No. 196191) 
[email protected] 

JEREMY E. PENDREY (Cal. Bar No. 1 87075) 
[email protected] 

Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
44 Montgomery Street, Suite 2600 
San Francisco, California 941 04 1 

Telephone: (41 5) 705-2500 
Facsimile: (41 5) 705-2501 

E-filing 
UNITED STATES DISTRICT COURT 

91  NORTHERN DISTRICT OF CALIFORNIA 

S, JOSE D I V I C  

v. I COMPLAINT 

12 

13 

15 JUNIPER NETWORKS, INC., I1 

l8 II Plaintiff Securities and Exchange Commission (the "Commission") alleges: 

SECURITIES AND EXCHANGE COMMISSION, 

Plaintiff, 

l9 11 SUMMARY OF THE ACTION 

Civil Action No. 

RS 

2o "I 1. From mid-1 999 through mid-2003, Juniper Networks, Inc. ("Juniper" or the 

21 "Company"), a Sunnyvale, California company that sells Internet Protocol networking solutions, I1 
22 I1 concealed hundreds of millions of dollars in expenses £tom investors, and significantly overstated the 

23 11 Company's income, by backdating employee stock option grants and failing to properly disclose and 

24 11 account for its true compensation expenses. 

25 I 2. Under well-settled accounting principles in effect throughout the relevant period, 

26 11 Juniper was not required to record an expense in its financial statements for options granted to 

27 1 employees at the market price ("at-the-money"), but was required to record expenses for any options 

28 11 granted below the current'market price ("in-the-money"). To help Juniper attract and retain 

CO~~~PLAINT 1 



executives and employees with potentially far more lucrative "in-the-money" options, without 

disclosing to shareholders hundreds of millions of dollars in compensation expenses, Juniper 

established a scheme to grant in-the-money options whle falsifying records to make it appear that the 

options had been granted at-the-money. 

3. By using option grant dates and exercise prices selected with hindsight, Juniper 

materially understated its expenses, overstated its income (or understated its losses), and falsely 

represented in certain Commission filings that Juniper had incurred no expense for option grants. 

The Commission seeks an order enjoining Juniper fkom future violations of the securities laws, and 

providing other appropriate relief. 

JURISDICTION AND VENUE 

4. The Commission brings this action pursuant to Section 20(b) and 20(d) of the 

Securities Act of 1933 ("Securities Act") [15 U.S.C. 977t(b) and 77t(d)] and Sections 21(d) and 

21(e) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. @78u(d) and 78u(e)]. 

5. This Court has jurisdiction over this action pursuant to Sections 20(b) and 22(a) of the 

Securities Act [15 U.S.C. $77t(b) and 77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act 

[15 U.S.C. $78u(d), 78u(e), and 78aal. 

6. Juniper, directly or indirectly, made use of the means or instrumentalities of interstate 

commerce, or of the mails, or of the facilities of a national securities exchange in connection with the 

transactions, acts, practices, and courses of business alleged herein. 

7. This Court is a proper venue for this action pursuant to Section 22 of the Securities 

Act [15 U.S.C. 9 77~1, and Section 27 of the Exchange Act 115 U.S.C. 9 77aaI because acts, 

transactions, practices, and courses of business constituting the violations alleged in this Complaint 

occurred within this district. 

INTRADISTRICT ASSIGNMENT 

8. Intradistrict assignment to the San Jose Division is proper pursuant to Civil Local Rule 

3-2(c) and (d) because acts or omissions giving rise to the Commission's claims occurred, among 

other places, in Santa Clara County, California. 

COMPLAINT 



DEFENDANT 

9. Juniper is a Delaware corporation headquartered in Sunnyvale, California that makes 

and sells intemet-related networking products. From June 1999 through the present, Juniper's 

common stock has been registered under Section 12 of the Exchange Act and traded on the NASDAQ 

National Market. At all times relevant to this action, Juniper used a fiscal year ending on December 

3 1. 

FACTUAL ALLEGATIONS 

Juniper's Stock Option Disclosures 

10. On June 24, 1999, Juniper became a public company through an initial public offering 

of its stock (an "IPO). Juniper grew rapidly following its IPO, hiring hundreds of employees 

through early June 2003. To support this rapid growth and to achieve its recruiting and compensation 

objectives, Juniper relied heavily on stock options as a recruiting and retention incentive. 

11. Each option gave the grantee the right to buy Juniper common stock fiom the 

Company at set price, called the "exercise" or "strike" price, on a future date after the option vested. 

The option was "in-the-money" when granted if the trading price of Juniper's common stock 

exceeded the option's exercise price. The option was "at-the-money" when granted if the trading 

price of Juniper's common stock and the exercise price were the same. 

12. By compensating employees with stock options, Juniper avoided paying greater 

salaries or other forms of compensation that would have been necessary to attract and retain 

employees. Juniper granted stock options to nearly all new full-time employees. Juniper also granted 

options to existing Juniper employees (called "ongoing" options), based on performance or other 

factors. 

13. As a public company, Juniper filed annual reports on Forms 10-K with the 

Commission that included audited financial statements, certified by the companies outside auditors. 

14. Juniper publicly represented, in audited financial statements and other filings with the 

Commission made for or during its fiscal years 1999 through 2005, that its stock option grants were 

made at fair market value. In particular, Juniper stated in its annual reports to shareholders filed with 

the Commission on Forms 10-K for its fiscal years 1999 through 2005: "Incentive stock options are 

COMPLAINT 3 



granted at an exercise price of not less than the fair value per share of the common stock on the date 

of grant." Juniper further stated in each of those reports on Forms 10-K that, although the Company's 

plans allowed for the granting of so-called "nonstatutory" stock options at an exercise price of not 

less than 85 percent of the then-market value, "no nonstatutory stock options have been granted for 

less than fair market value on the date of the grant." 

15. Juniper's public filings also affirmatively stated that the Company accounted for its 

employee stock option plans in accordance with GAAP, and particularly, that the Company followed 

Accounting Principles Board's Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 

25"). Under APB 25 and the accounting rules in effect during the relevant period, the Company was 

required to record an expense on its financial statements for the in-the-money portion of any options 

grant. According to APB 25, that difference between the exercise price (if lower) and the quoted 

market price on the date of the actual grant must be recorded as compensation expense to be 

recognized over the vesting period of the option. Consequently, granting in-the-money options to 

employees could have a significant impact on the expenses and income (or loss) reported to the 

shareholders of a public company. 

16. APB 25 allowed a public company, where the key terms of an option grant were 

known, to grant employee stock options without recording any compensation expense so long as the 

option exercise price was not below the market price of the company's stock on the date of the grant. 

In each of its Forms 10-K filed with the Commission for fiscal years 1999 through 2005, Juniper 

represented that it had "elected to follow APB 25," and that "[b]ecause the exercise price of the 

Company's stock options equals the market price of the underlying stock on the date of grant, no 

compensation expense is recognized." 

17. Juniper also sent to shareholders proxy statements announcing its annual meetings of 

shareholders for 2000 through 2003, filed with the Commission on April 13,2000, March 28,2001, 

April 11,2002, and March 28,2003. The proxy statements for 2000,2001, and 2003, in describing 

zxecutive compensation and particularly options granted to officers, represented that "options are 

granted at fair market value on the date of grant." Similarly, the 2002 proxy statement, in responding 

to a shareholder proposal regarding the Company's repricing (or regranting) of stock options, 

:OMPLAINT 4 



represented that employees at Juniper who have been avyarded stock options "have a right to purchase 

stock in the future at a price which is the fair market value on the date of the stock option grant." 

The Scheme to Backdate Option Grants 

18. On July 2 1, 1999, Juniper's Board of Directors created a three-member Stock Option 

Committee ("Stock Option Committee") consisting of Juniper executives, to which it delegated 

authority to grant stock options to Juniper's non-executive employees. One purpose in creating the 

Stock Option Committee was to enable Juniper to have more flexibility in granting options. The ' 

Stock Option Committee held few, if any, actual meetings. 

19. From mid-1999 to mid-2003, a Juniper executive, who has since left the Company, 

unilaterally determined with hindsight the date for most Juniper stock option grants. In addition, the 

executive routinely created backdated "minutes" for Stock Option Committee meetings that never 

occurred. 

Juniper Backdated New Hire Stock Option Grants 

20. Beginning in the second half of 1999, the Juniper executive routinely prepared 

backdated stock option grants to issue options to groups of recently hired employees of Juniper. For 

these new hire grants, the executive collected the names of recently hired employees and had lists 

prepared. The executive then selected as the exercise price of the new hire grants the closing price of 

Juniper's stock on a date in the past, reflecting the low closing price during a particular period around 

the time the employees were hired. For each backdated grant fkom 1999 through 2003, the executive 

then created Stock Option Committee meeting "minutes" that falsely stated that the Stock Option 

Committee had met on the date of the low closing price and granted options on that date. 

21. The executive signed the backdated committee "minutes" as a Stock Option 

Committee member. In addition, for each backdated grant the executive either presented the minutes 

to the other Stock Option Committee members for signature or stamped the minutes with a signature 

stamp the executive maintained bearing the other Stock Option Committee members' signatures. 

22. Once the executive selected a backdated grant date and a corresponding exercise price, 

the executive informed Juniper's stock administrator, who then entered the grants into Juniper's stock 



option tracking software using the backdated date as the grant date. Juniper did not reflect in its 

books an expense related to the in-the-money portion of the options. 

23. For example, Juniper granted options to six new Juniper employees on the purported, 

but false, grant date of October 27, 1999. The six employees were hired on Monday, October 25, 

1999, at which time Juniper's stock traded at $257.75. Juniper's stock price dipped to a low of 

$249.94 on Wednesday, October 27, then rose to $275.63 by the end of the week. The Juniper 

executive actually selected the grant date in mid-November 1999, when Juniper's stock was trading 

around $283.50, using information about Juniper's historical closing prices for its stock during the 

week the employees were hired. 

24. Similarly, Juniper granted stock options to employees hired between October 8,2002 

through January 2,2003, using the backdated January 2,2003 closing price of $7.36 as the purported 

"fair market value" of the stock on the grant date. The Stock Option Committee never met on 

January 2,2003. Instead, during mid-February, when Juniper's stock was 'trading around $9 per 

share, the executive selected that earlier January 2 date. The January 2,2003 closing price for 

Juniper's stock, $7.36, used as the exercise price, was Juniper's lowest closing price of the year up to 

the time the executive selected the grant date. 

25. Using dates selected with hindsight between mid-June 1999 through the end of May 

2003, the Juniper executive backdated more than 50 grants to groups of new employees. More than 

$300 million in expenses associated with the in-the-money portion of those grants were not disclosed 

by Juniper as a consequence of the scheme. 

Juniper Backdated "Ongoing" Stock Option Grants 

26. From mid-1 999 through mid-2003, Juniper also backdated performance-related grants 

to existing employees and officers, which Juniper called "ongoing" grants. Juniper thus backdated 

large grants to officers and employees that were made to create retention and performance incentives 

(and which at times included new hires), on approximately nine occasions. 

27. For instance, Juniper granted options to a large group of existing employees and 

officers (and to certain new hires), which it called an "evergreen" grant, using the backdated grant 

date of October 4, 1999. The Stock Option Committee did not meet on October 4, 1999, and no one 

COMPLAINT 6 



determined to grant the employees and officers options that day. Instead, on November 5, 1999, 

when Juniper's stock price traded at $273.13, the Juniper executive created Stock Option Committee 

meeting minutes dated October 4, 1999, when Juniper's stock priced closed at $182.13 - the lowest 

price of that quarter to date. The executive subsequently caused Juniper's Board of Directors to be 

falsely informed that the grant had been made on October 4,1999. More than $100 million in 

expenses associated with the in-the-money portion of this "evergreen" grant were not disclosed by 

Juniper. 

28. On occasion, Juniper granted "pools" of stock options to certain business units to be 

awarded to employees based on the discretion of the business unit manager. On seven different 

occasions between 2000 and 2003, Juniper backdated "pool" grants (which also included certain 

grants to new hires). More than $200 million in expenses associated with the in-the-money portion of 

these "pool" grants were not disclosed by Juniper. 

29. For example, Juniper granted options to existing employees and senior executives (as 

well as some new hires) in one such "pool" grant, using the backdated grant date of December 21, 

2000. Juniper's stock price closed at $93.94 on December 21,2000, which was the lowest stock price 

of the six months up to that date. No Stock Option Committee meeting occurred on that date. The 

grant was actually made in or around early January 2001, when Juniper's stock price was trading over 

$100 per share. 

30. In the spring of 2001, Juniper's stock price had declined substantially from the levels 

experienced during 1999 and 2000. Consequently, many options awarded during those earlier years 

had strike prices well above the then-current stock price (known as "underwater" options). 

3 1. In approximately April 2001, Juniper instituted a program to award additional options 

to existing employees using a formula based on the number of underwater options each employee 

then had, and the length of time each had been employed by Juniper. As part of the program, Juniper 

granted one block of this "formula" grant using as the grant date April 4,2001, when Juniper's stock 

price closed at $29.19. The Juniper executive caused the grant to be backdated to April 4, selecting 

that date with hindsight on or about April 19,2001, when Juniper's stock price had more than 

doubled to $65.58. 

COMPLAINT 7 



Juniper Falsely Reported Its Financial Results 

32. As a public company, Juniper filed with the Commission annual reports on Form 10-K 

that included the audited financial statements, certified by the companies' outside auditors, which 

falsely represented Juniper's financial results. Due to Juniper's failure to record an expense for in- 

the-money options, Juniper's financial statements were materially misstated in each fiscal year fiom 

1999 through 2005. 

33. For example, for its fiscal year 2001, Juniper originally reported a loss of $13.4 

million. However, after the company ultimately recorded a compensation expense for previously 

undisclosed in-the-money option grants in restated financials for this period, the Company reported 

an additional expense of $5 13.1 million, which (after adjusting for taxes) brought Juniper's loss for 

the year to $501.5 million. 

34. Similarly, for its fiscal year 2003, Juniper originally reported net income of $39.2 

million, representing the Company's first profitable year ever. As a result of Juniper's failure to 

record a compensation expense for backdated, in-the-money option grants, Juniper's pre-tax income 

was reduced by $19.3 million, which, after adjusting for taxes, reduced its net income to $30.7 

million for the year, a profit reduction of 21.68%. 

35. Juniper also publicly announced quarterly financial results, which were described in 

financial statements included in quarterly reports filed with the Commission on Forms 1 0-Q, that 

were materially false and misleading due to Juniper's failure to record compensation expenses 

associated with in-the-money options. Thus, Juniper's quarterly reports filed on Forms 10-Q 

beginning with the quarter ended September 30, 1999, and for each of the Company's first three 

quarters in fiscal years 2000 through 2002, and the first two quarters of fiscal year 2003, contained 

materially false and misleading financial statements. 

36. Juniper filed with the Commission current reports on Forms 8-K on April 10,2003, 

July 10,2003 and October 9,2003, each of which included announcements about the Company's 

financial results for prior quarters that were materially false and misleading due to Juniper's failure to 

record compensation expenses associated with undisclosed grants of in-the-money stock options. 

COMPLAINT 8 



37. Juniper filed with the Commission registration statements on Form S-8 on March 14, 

2000, August 18,2000, December 12,2000, March 29,2001, December 21,2001, July 9,2002, April 

21,2004, August 18,2004, May 3,2005, May 4,2005, July 6,2005 and March 7,2006, each of 

which incorporated by reference false and misleading periodic reports. 

38. In May 2006, the audit committee of Juniper's board of director's began to investigate 

the Company's historical options granting practices. As a result of the audit committee investigation, 

Juniper announced in March 2007 restated financial results to record expenses for options granted to 

employees. Juniper announced the recording of additional pre-tax, non-cash, stock-based 

compensation expense of $894.7 million for fiscal years 1999 through 2005 under APB 25. 

FIRST CLAIM FOR RELIEF 

Violations of Exchange Act Section 10(b) and Rule lob-5 Thereunder 

39. The Commission realleges and incorporates by reference paragraphs 1 through 38 

above. 

40. By engaging in the conduct described above, Juniper, directly or indirectly, in 

connection with the purchase or sale of securities, by the use of means or instrumentalities of 

interstate commerce, or the mails, with scienter: 

a. Employed devices, schemes, or artifices to defi-aud; 

b. Made untrue statements of material facts or omitted to state material facts 

necessary in order to make the statements made, in the light of the circumstances 

under which they were made, not misleading; and 

c. Engaged in acts, practices, or courses of business which operated or would operate 

as a fraud or deceit upon other persons, including purchasers and sellers of 

securities. 

41. By reason of the foregoing, Juniper has violated and, unless restrained and enjoined, 

will continue to violate Section lo@) of the Exchange Act [15 U.S.C. 5 78j@)] and Rule lob-5 [17 

C.F.R. $240.10b-51. 

COMPLAINT 



SECOND CLAIM FOR RELIEF 

Violations of Securities Act Section 17(a)(l) 

42. The Commission realleges and incorporates by reference Paragraphs 1 through 38 

above. 

43. By engaging in the conduct described above, Juniper, directly or indirectly, in the offer 

or sale of securities, by use of the means or instruments of transportation or communication in 

interstate commerce or by use of the mails, with scienter, employed devices, schemes, or artifices to 

defkaud. 

44. By reason of the foregoing, Juniper violated and, unless restrained and enjoined, will 

continue to violate Section 17(a)(l) of the Securities Act [15 U.S.C. § 77q(a)]. 

THIRD CLAIM FOR RELIEF 

Violations of Securities Act Sections 17(a)(2) and (3) 

45. The Commission realleges and incorporates by reference Paragraphs 1 through 38 

above. 

46. By engaging in the conduct described above, Juniper, directly or indirectly, in the offer 

or sale of securities, by use of the means or instruments of transportation or communication in 

interstate commerce or by use of the mails: 

a. Obtained money or property by means of untrue statements of material fact or by 

omitting to state a material fact necessary in order to make the statements made, in 

light of the circumstances under which they were made, not misleading; and 

b. Engaged in transactions, practices, or courses of business which operated or would 

operate as a fiaud or deceit upon the purchasers. 

47. By reason of the foregoing, Juniper has violated and, unless restrained and enjoined, 

will continue to violate Sections 17(a)(2) and (3) of the Securities Act [15 U.S.C. $ 77q(a)(2) and 

(31- 

COMPLAINT 



FOURTH CLAIM FOR RELIEF 

Violations of Exchange Act Section 13(a) and Rules 12b-20,13a-1,13a-l1, 
and 13a-13 Thereunder 

48. The Commission realleges and incorporates by reference Paragraphs 1 through 38 

above. 

49. Based on the conduct alleged above, Juniper violated Section 13(a) of the Exchange 

Act [15 U.S.C. 78m(a)] and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder 117 C.F.R. $$ 

240.12b-20,240.13a- 1,240.13a-11, and 240.13a-131, which obligate issuers of securities registered 

pursuant to Section 12 of the Exchange Act [15 U.S.C. 784 to file with the Commission accurate 

periodic reports, including annual, current, and quarterly reports. Unless restrained and enjoined, 

Juniper will continue to violatesection 13(a) of the Exchange Act [15 U.S.C. $ 78m(a)] and Rules 

12b-20, 13a-1, 13a-11, and l'3a-13 thereunder [17 C.F.R. §§ 240.12b-20,240.13a-1,240.13a-11, and 

240.13a-131. 

FIFTH CLAIM FOR RELIEF 

Violations of Exchange Act Section 13@)(2)(A) 

50. The Commission realleges and incorporates by reference Paragraphs 1 through 38 

above. 

5 1. Based on the conduct alleged above, Juniper violated Section 13(b)(2)(A) of the 

Exchange Act [15 U.S.C. § 78m(b)(2)(A)], which obligates issuers of securities registered pursuant to 

Section 12 of the Exchange Act [15 U.S.C. 784 to make and keep books, records and accounts 

which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets 

of the issuer. Unless restrained and enjoined, Juniper will continue to violate Section 13(b)(2)(A) of 

the Exchange Act [15 U.S.C. 78m(b)(2)(A)]. 

SIXTH CLAIM FOR RELIEF 

Violations of Exchange Act Section 13@)(2)(B) 

52. The Commission realleges and incorporates by reference Paragraphs 1 through 38 

above. 



53. Based on the conduct alleged above, Juniper violated Section 13(b)(2)@) of the 

Exchange Act 115 U.S.C. 78m(b)(2)(B)I7 which obligates issuers of securities registered pursuant to 

Section 12 of the Exchange Act [15 U.S.C. 5 784 to devise and maintain a sufficient system of 

internal accounting controls. Unless restrained and enjoined, Juniper will continue to violate 

13(b)(2)@) of the Exchange Act [15 U.S.C. 5 78m(b)(2)(B)]. 

SEVENTH CLAIM FOR RELIEF 

Violations of Exchange Act Section 14(a) and Rule 14a-9 thereunder 

54. The Commission realleges and incorporates by reference Paragraphs 1 through 38 

above. 

55. Based on the conduct alleged above, Juniper violated Section 14(a) of the Exchange 

Act [15 U.S.C. 5 78n(a)] and Rule 14a-9 thereunder 117 C.F.R. 8 240.14a-91, which prohibits 

solicitations by means of a proxy statement, form of proxy, notice of meeting or other 

communication, written or oral, that contains a statement which, at the time and in the light of the 

circumstances under which it was made, was false or misleading with respect to any material fact, or 

which omits to state any material fact necessary in order to make the statements therein not false or 

misleading or necessary to correct any statement in any earlier communication with respect to the 

solicitation of a proxy for the same meeting or subject matter which had become false or misleading. 

Unless restrained and enjoined, Juniper will continue to violate Section 14(a) of the Exchange Act 

[15 U.S.C. 5 78n(a)] and Rule 14a-9 thereunder [17 C.F.R. 8 240.14a-91. 

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court: 

I. 

Permanently enjoin Juniper from directly or indirectly violating Section 17(a) of the Securities 

Act [15 U.S.C. 5 77q(a)] and Sections 1 O(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the 

Exchange Act [15 U.S.C. $8 78j(b), 78m(a), 78m(b)(2)(A), 78m(b)(2)@) and 78n(a)], and Rules 

lob-5, 12b-20, 13a-1, 13a-11, 13a-13, and 14a-9 [17 C.F.R. $8 240.10b-5,240.12b-20,240.13a-1, 

240.13a-11,240.13a-13, and 240.14a-91 thereunder; 

COMPLAINT 12 



Retain jurisdiction of this action in accordance with the principles of equity and the Federal 

Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that 

may be entered, or to entertain any suitable application or motion for additional relief within the 

jurisdiction of this Court; and 

111. 

Grant such other relief as this Court may deem just and appropriate. 

, . 

Dated: ~ u ~ u s t  2007 

ReeAll;b7;d,,u 

y E. Pendrey 
~ 6 o r n e ~ s  for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 

COMPLAINT