Tech Industry under fire as Fed investigation into Stock Option Grants widens

[mandy]

Like betting on a horse race after its finish, some executives were guaranteed to be "in the money."

That is how investor advocates and irate shareholders describe it as signs emerge daily about possible manipulation of the timing of stock options grants to enrich top company executives.

Two of the latest cases appear to involve novel twists that are taking the growing scandal down a new path as the government's investigations widen. Three dozen companies are under scrutiny by the Securities and Exchange Commission or federal prosecutors...

full article: http://www.forbes.com/home/feeds/ap/2006...10404.html

Several major technology companies -- including semiconductor maker Broadcom and Internet job site Monster -- disclosed Monday that they have established committees to investigate the handling of stock options grants as scrutiny of the practice spreads to include dozens of companies. Also caught up in the frenzy to determine whether options were granted improperly or back-dated to make them more valuable, were data center operator Equinix, voice mail software maker Comverse Technology and medical device maker Cyberonics...

"Tech firms have always used options as a way of leveling the playing field with more established industries in terms of attracting and retaining executives," Joseph Rich, president of executive compensation consulting firm Pearl Meyer & Partners, said. In terms of sheer volume of options granted, tech firms are far more likely to be under scrutiny, he added...

full article: http://www.ecommercetimes.com/story/8ksT...ions.xhtml

[regic]

This is boinking nice:

Insurers providing liability insurance to corporate directors and officers may have to pay for legal expenses -- and perhaps even multimillion-dollar damage awards -- for company officers that manipulated stock options to benefit their managers, industry executives said.

Backdating means retroactively setting the grant date and exercise price of options to before a rally in the underlying shares, making the options worth more.

full article: http://www.washingtonpost.com/wp-dyn/con...00554.html

[mandy]

The FBI and federal prosecutors in San Francisco said Wednesday that they are escalating their investigation into possibly illegal stock option backdating by area companies.

U.S. Attorney Kevin Ryan announced that a new eight-person task force will try to determine whether Northern California companies retroactively changed the grant date of stock options with intent to defraud investors. It appears to be the only such task force in the nation.

"We will evaluate the facts of each case, and we will bring criminal charges when appropriate," Ryan said.

Allegations about stock option backdating, while not necessarily illegal, have ensnared dozens of companies and drawn the attention of securities regulators and plaintiffs' lawyers...

full article: http://news.com.com/Feds+ramp+up+Silicon...g=nefd.top

[mandy]

Shelby Bonnie has resigned as chairman and chief executive of CNET following a review of the company's practices regarding stock options. Bonnie will remain a member of CNET's board. He apologized for the options-related problems in a statement released by the company...

full article: http://www.ecommercetimes.com/story/q0yI...robe.xhtml

Data security giant McAfee said Wednesday it has fired its president and accepted the resignation of its CEO after an internal investigation into stock options accounting turned up problems that will require extensive restatement of past earnings. CEO George Samenuk, who also held the position of chairman, said his decision to retire after six years at McAfee, the number two antivirus software maker, was "in the best interests of the company, its shareholders and employees."

McAfee said Wednesday that it has fired its president and accepted the resignation of its CEO amid a widening scandal regarding stock options accounting. The firing and resignation are the latest high-profile casualties of what has become a massive scandal regarding the timing of and accounting for stock options grants...

Also on Wednesday, technology publisher CNET Networks said CEO and Chairman Shelby Bonnie had resigned...

The companies are just two of some 140 now said to be involved in either internal or external investigations around stock options grants and the practice of back-dating, in which a company adjusts the timing of stock options grants to a time when the market price of the stock was low. The result is a wider spread between the option price and the trading price...

full article: http://www.ecommercetimes.com/story/Vs4U...-CEO.xhtml

[mandy]

The latest:

Federal prosecutors have drawn first blood in the stock options backdating scandal. Following a five-week trial, Gregory L. Reyes, the former CEO of Brocade Communications Systems, was convicted of 10 counts of conspiracy and fraud in Federal District Court in San Francisco. Reyes could receive a sentence as steep as 20 years in prison, as well a multimillion dollar fine, under federal guidelines...

Reyes' conviction underscores the feds' determination to fully prosecute the apparently rampant violations that occurred in Silicon Valley and other tech enclaves. Investigations were initiated into the practices of some 140 companies over the last year or so; most of those cases are still under SEC review...

full article: http://ecommercetimes.com/story/DTXw42qY...Case.xhtml