Posted on 07/14/2006 5:42:22 AM PDT by Brilliant
The U.S. attorney for the Northern District of California launched a task force focused on stock-options backdating by companies, ratcheting up the government's probes of possible manipulation of a form of executive pay...
Federal prosecutors around the country and the Securities and Exchange Commission are investigating more than 50 companies because executives received options grants at low prices just before steep jumps in company share prices. Investigators suspect companies may have backdated, or otherwise changed, the timing of options to make them more lucrative. An option gives its holder the right to buy shares at an exercise price -- typically the market value of a company's stock on the date of the award. Any subsequent rise in the share price allows the option holder to cash in the option and pocket the difference between the exercise and market prices.
Mr. Ryan's office covers Silicon Valley, the epicenter of the technology industry, which has long used stock options as a way to lure executives and other employees with the promise of big paydays. His office already has issued subpoenas to more than a dozen companies, according to SEC filings. These firms include KLA-Tencor Corp., a semiconductor-equipment manufacturer; Web-site operator CNET Networks Inc.; and Altera Corp., a chip maker...
In a statement, Mr. Ryan said he would investigate "whether individuals and companies may have deliberately backdated stock options with the intent to defraud," adding, "It is integral to the public trust in our financial markets that books and records are maintained honestly, and that the true financial condition of public companies is disclosed accurately."
Backdating could "constitute fraud on the company, shareholders, and the market, and may give rise to tax violations," he added. "We will evaluate the facts of each case, and we will bring criminal charges when appropriate."...
(Excerpt) Read more at online.wsj.com ...
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