Kai-Fu Lee’s uneventful departure from Google to start a Beijing incubator really belies the spectacle that attended the beginning of his tenure at the search giant.

Lee’s train-hopping from Microsoft (MSFT) to Google (GOOG) back in 2005 touched off a five-month pitched battle marked by all manner of inanities. Among them was this account of Microsoft CEO Steve Ballmer’s now-infamous alleged chair-tossing tantrum told by former Microsoft Distinguished Engineer Mark Lucovsky:

Prior to joining Google, I set up a meeting on or about November 11, 2004 with Microsoft’s CEO Steve Ballmer to discuss my planned departure…At some point in the conversation, Mr. Ballmer said: “Just tell me it’s not Google.” I told him it was Google.

At that point, Mr. Ballmer picked up a chair and threw it across the room hitting a table in his office. Mr. Ballmer then said: “F–king Eric Schmidt is a f–king p–sy. I’m going to f–king bury that guy, I have done it before, and I will do it again. I’m going to f–king kill Google.”

Thereafter, Mr. Ballmer resumed trying to persuade me to stay…Among other things, Mr. Ballmer told me that “Google’s not a real company. It’s a house of cards.”

And there were others as well. Certainly, the sourcing of some of Microsoft’s legal docs was amusing. As I wrote at the time:

Kai-Fu Lee may be a top-drawer research engineer, but his understanding of the mechanics of Microsoft’s desktop environment leaves a bit to be desired. Turns out Microsoft recovered Lee’s employment contract with Google, which figures prominently in its suit against the search leader (see “And, if you’re beaten by Microsoft thugs, our generous health plan will cover you”), from the “recycle bin” of one of Lee’s computers. Odd that Lee would choose to browse offers from his employer’s rivals on his work computer. Odder still that having done so, he would neglect to scrub them with a secure erase program. Clearly, he must have been a bit lightheaded after learning of Google’s promise to allow his stock options in the company to vest even if he was unable to start work for a year.

Then there was Lee’s testimony about a meeting with Bill Gates, during which the Microsoft chairman blew his top, shouting that the Chinese people and the Chinese government had “f—ked” Microsoft.

And, finally, there were the videotaped depositions, like one from Ballmer that included this great bit:

Ballmer: “Kai-Fu had a–a distinct commitment and responsibility on behalf of the company for being the senior executive here in Redmond, with responsibility for godfathering, shepherding all of our R&D activities in China. It’s a structure we also use for India. We have a senior executive with knowledge of India be the R&D godfather for India, encourage work to go there, shepherd, and–and mentor people in the area. Kai-Fu had that broad, important responsibility for China.”

Deposing lawyer: “This term, ‘godfather’–is that an official title within the Microsoft organization?”

Hard to believe Kai-Fu Lee’s tenure at Google China ended with such a whimper, although there are many quiet rumblings of trouble he had with Google’s top execs in Silicon Valley, given the bang it began with.

But it did. And here endeth the history lesson.

Citing misconduct by prosecutors, a three-judge panel of the United States Court of Appeals for the Ninth Circuit in San Francisco ordered a new trial for Reyes, who had been convicted of 10 charges of conspiracy, fraud, making false regulator filings and falsifying records for backdating hundreds of employee stock options.

A favorable turn of luck for Reyes, who had been sentenced to 21 months in prison and ordered to pay a $15 million fine for misdeeds that, according to that three-judge panel, had been grossly exaggerated and perhaps even fabricated.

“Deliberate false statements by those privileged to represent the United States harm the trial process and the integrity of our prosecutorial system,” Judge Mary Schroeder wrote in the 3-0 ruling. “We do not lightly tolerate a prosecutor asserting as a fact to the jury something known to be untrue or, at the very least, that the prosecution had very strong reason to doubt.”

The panel stopped short of throwing the case out entirely, noting that “there was no question that Reyes signed off on stock-option grants that were priced retrospectively and that the backdating allowed Brocade to understate its compensation expenses.” So the United States attorney could opt to retry the case, though that seems a bleak option at this point given the tenor of the ruling.

“This is the highest profile [backdating] case they had that went to trial, so I’d expect they will try it again, if for no other reason than for reputational purposes,” Wayne State University law professor Peter Henning told the Mercury News. “But talk about a case that’s stale.”

Quite a bit higher, it turns out.

$1.95 billion is the company’s market cap as of March 27, when it had 137.84 million shares outstanding. But this figure doesn’t include preferred shares, etc. So Palm’s true valuation–equity valuation with convertible preferred shares, exercisable and nonexercisable in-the-money options, warrants and whatnot–at its current share price of $13.87 is about $2.9 billion.

$423 million to $2.9 billion in 12 months.

Turnaround story of the year. For now, anyway….

The company neither admitted nor denied wrongdoing, though CEO Sal Iannuzzi’s comment on the matter was fairly apologetic, as well it should be–after all, Monster had to restate its results for 1997 through 2005 to the tune of about $339.5 million (pre-tax). “This is an important step in closing an unfortunate chapter in the company’s history and putting the issue firmly behind us,” Iannuzzi said in a statement. “Our current executive team has spent the last two years refocusing Monster on its customers and shareholders, retooling the day-to-day management, and overhauling governance in an effort to adhere to the highest standards.”

In a regulatory filing today, the company said it has asked shareholders to approve a plan to offer employees the opportunity to swap underwater stock options for restricted stock. “Like many companies, we have experienced a significant decline in our stock price over the last year in light of the current global financial and economic crisis,” eBay explained in its argument for implementing the plan. “Because of the continued challenging economic environment and the uncertain impact of our efforts to change our business, we believe these underwater stock options are no longer effective as incentives to motivate and retain our employees.”

And this may well be the case. That said, you’d think that the widespread and fast-mounting job losses in the tech sector would be enough to keep most folks still collecting paychecks coming in to work. Nice gesture, though.

Should the settlement be approved at an upcoming Oct. 31 hearing, it will put an end to an options debacle that’s been going on since 2006.

The settlement marks the end of a legal debacle that began back in 2006, after an investigation by the Apple board uncovered some troubling options grants at the company. It also means that Jobs, who was likely to have been called to testify in Heinen’s SEC trial, won’t be. “This is it for backdating of stock options and Apple,” Peter Henning, a law professor at Wayne State University, told the Los Angeles Times. “Steve Jobs dodged a bullet.”

Happy news for Apple, CEO Steve Jobs (shown above in mid-victory dance) and former Apple CFO Fred “It was you, Fredo” Anderson and former general counsel Nancy Heinen, who’ve all managed to dodge quite a legal bullet. Presumably it will be quite a bit more difficult for the civil suits filed against them to succeed with no criminal charges being filed.

It’s taken nearly a year, but Google (GOOG) has finally decided on a replacement for departing CFO George Reyes. Bell Canada executive Patrick Pichette, who served as the telecom’s president of operations and CFO, will take over for Reyes on Aug. 12.

“Google is a great company with a phenomenal brand and an outstanding management team,” said Pichette. “As an avid user of Google products, I’ve admired the company for many years and am excited about working with my new colleagues in Mountain View and around the world.”

Excited about his new compensation package too, I bet: $450,000 a year base salary, stock options, a signing bonus of $500,000 and an additional $500,000 after six months and eligibility for a discretionary bonus of up to 150% of his base salary (see offer letter below).

And as for Reyes? Well, having joined Google well before its 2004 initial public offering, he will presumably be spending the remainder of the summer enjoying some of the obscene wealth that the IPO created. When he first announced his plans to leave Google, Reyes was holding more than 50,000 exercisable options. As of June 3, he held a bit more than 10,000.

Pichette’s offer letter after the jump.

June 6, 2008
Patrick Pichette
Re: Offer of Employment with Google Inc.

Dear Patrick:

On behalf of Google Inc., I am pleased to offer you the exempt position of Senior Vice President and Chief Financial Officer, reporting to the Chief Executive Officer, subject to the terms and contingencies set forth below. The position is located in Mountain View, California. Your start date shall be August 1, 2008 and you will assume the position of CFO effective August 12, 2008.

You will receive an annual salary of $450,000, which will be paid biweekly and subject to a periodic review. You are eligible to participate in the Company Bonus Program; your annual bonus target will be 150% of base salary. Bonuses under the Company Bonus Plan are discretionary. The actual bonus amount could be larger or smaller than this amount, based on your performance and the performance of the Company. Whether a bonus will be awarded in a particular bonus period, and in what amount, is within Google’s sole discretion. Both your base salary and the components of your bonus are subject to periodic review.

Additionally, upon your start date, Google will pay you a one-time Sign-On Bonus of $500,000. This will be taxed as supplemental income. At the completion of six months of full-time employment with us, Google will pay you an additional $500,000 Cash Bonus. This will also be taxed as supplemental income. In the event your employment is terminated within the first six months of your employment, the Cash Bonus payout will be accelerated and paid on the termination date or as soon thereafter as Company business practices allow, but in any case within thirty (30) days of your termination. If you terminate your employment at Google before the one year anniversary of your start date, other than as a result of a breach by Google of this Agreement, you will be required to repay the Sign-On Bonus and Cash Bonus. Any required repayment will be prorated based on the number of remaining calendar days until the one year anniversary of your start date.

Google will pay relocation costs and provide reimbursement for specified moving expenses as outlined in Google’s North American Officer Relocation Policy. In order to receive these benefits, you will be required to work with a third party vendor provider designated by Google to assist in employee moves.

As a regular full-time employee you will be eligible for various benefits offered to similarly-situated Google employees in accordance with the terms of Google’s policies and benefit plans. Among other things, these benefits currently include medical and dental insurance, life insurance, and a 401(k) retirement plan. You will automatically be enrolled in the 401(k) plan at 4% into the Wellesley Fund, which is a balanced fund of stocks and bonds. You will be able to change your deferral amount and fund allocation upon your hire. The eligibility requirements and other information regarding these benefits are set forth in

Seems that when Judge Jeremy Fogel rejected the suit on the grounds that it was based on statements made more than three years before the case was filed, he offered the plaintiffs the option to amend it with more timely statements. Which is exactly what they plan to do. Said Mark Molumphy, attorney for the plaintiffs, “The discovery we have so far has made the case stronger.”

Hope so. Because if it’s not, Fogel may order dismissal with prejudice.

And that puts Jobs in an uncomfortable position. Because while Apple has cleared him of any wrongdoing, former Apple CFO Fred “It was you, Fredo” Anderson did try to implicate him in the scandal (Post continues after video … ).

Though Apple dismissed Anderson’s accusations as the ravings of a madman, they’re still not the sort of thing you want hanging over you when you’re testifying before an SEC panel. Because though the agency has said it will take no action against Apple, it hasn’t ruled out continued scrutiny of Jobs.