Backdating stock options legal
His practice includes government investigations and white-collar criminal matters.His experience includes securities class actions, accountants liability cases, directors and officers liability matters and general business litigation.Also, some companies have independently confirmed that they've been contacted by federal investigators.Those include Altera, Applied Micro Circuits, Asyst Technologies, CNET Networks (publisher of CNET News.com), Equinix, Foundry Networks, Intuit, Marvell Technology Group, RSA Security and Veri Sign.But if you're lucky enough to have a coupon that lets you buy a Ferrari for a mere ,000, your piece of paper would have a far more handsome market value of ,000. If an executive is able to change the grant date of an option retroactively--for instance, to when the stock was trading at a lower price--the options become more lucrative. Stock options by themselves are not problematic or controversial. One method academics have used to measure the pervasiveness of backdating is to review stock option grants to executives to see if an unusual number are clustered around dates when the stock is trading at a low value.
Last week, federal investigators announced criminal charges against former executives of Brocade Communications Systems, and they're hinting that more cases may be on the way.
Gregory Reyes, Brocade's chief executive until 2005, and Stephanie Jensen, the company's vice president of human resources from 1999 to 2004, are facing civil and criminal charges.
In addition, Antonio Canova, Brocade's former chief financial officer, is facing civil charges. The FBI has not alleged that Reyes backdated stock options for his own financial benefit.
Backdating of stock option grants has quickly arisen as the hottest area of concern for corporations, their boards, senior officers and in house and outside counsel.
In 2006, the SEC unanimously approved sweeping new rules for disclosures required on executive compensation, including the full value of options granted.
Meanwhile, Silicon Valley's top lawyers are scrambling to assuage their clients' fears, and the U. Security and Exchange Commission has said that the investigation will expand beyond technology companies to other publicly traded outfits.