Backdating companies - datingchatlines com
If someone presents you with a spreadsheet of the last month’s stock prices and asks you to pick the date on which you want to pretend that you granted, or were granted, several million options, might that not at least spur further inquiry?When then-general counsel Nancy Heinen emailed Apple (AAPL) CEO Steve Jobs such a spreadsheet on January 30, 2001, she noted that it was a bad idea to choose January 2 as the grant date–even though that was the day the stock had been at its lowest–if they wanted “to avoid any perception that the Board was acting in appropriately [sic] for insiders prior to Macworld announcements.” (They ultimately chose one of the next-best dates from after Macworld.) Now isn’t it obvious to everyone on that email that shareholders are being misled?
In July, Kevin Ryan, the United States Attorney for the Northern District of California, the top federal prosecutor in San Francisco, formed a task force with the FBI to investigate whether Bay Area companies and executives fraudulently backdated stock option grants.
My question is, if that’s your position, how can anybody be feigning shock that Nancy Heinen then went on to file all the false documents that would be required in order to carry out what everyone understood to be a spitting-on-the-sidewalk type infraction they were willing to commit.
At a public company, it’s not just foreseeable that any deception upon shareholders will eventually have to be reduced to writing–it’s inevitable.
Last October I interviewed Scott Mc Nealy, CEO of Sun Microsystems (SUNW), for a different story, and I brought up the subject of options backdating.
I thought his comment was telling: “When I sign a document and it has a date thing there? I didn’t even go to law school, and I figured out that that’s probably the most appropriate thing.” By the way, even in the unlikely event that someone backdates options and accounts for them properly–i.e., treats them as in-the-money options–he would still almost always be violating the terms of the stock option plan which has been approved by shareholders.
Apple Computer made headlines earlier this summer when it announced it would be late in its quarterly filings to the SEC to give it time to restate earnings to take into account backdated options.
Two executives from Brocade Communications have been indicted on criminal charges for securities fraud for possible manipulation of stock options, and the SEC has filed a civil complaint against the company.The price is usually the price the stock traded at on the date the option was granted.If the stock price rises above the price at the option's grant date, the option becomes "in the money," and the holder of the option can buy the shares at the grant-date price, which is less than current market price.Those plans almost always require that the options be granted at fair market value on the date of the grant.And if there is a stock option plan that doesn’t contain that language, the backdater would still have to make disclosures in a half-dozen publicly filed documents about what he was doing. Something like: “Please note that when we grant options, we sometimes pretend that we grant them on certain dates when in fact we grant them weeks later. We just do this to amuse ourselves, because we account for them properly using the real dates.” Could the next person who writes in to remind me that backdating isn’t illegal do me a favor?Sure the accounting rules are arcane and most people don’t know them.