Monday, August 14, 2006
An upsurge of criminal charges and financial reporting delays stemming from the stock options scandal is putting even more heat on the electronics industry.
The dog days of August have been unkind to many electronics, software, and communications companies. Governmental authorities are making good on their promise to crack down on individuals committing misdeeds in the backdating of stock options, a practice that has turned out to be more rampant than originally thought
Even where individuals have not been implicated, more companies are paying the consequences for their stock options practices as their financial pictures are fallen into disarray. A wave of companies—:most of them having already spent weeks investigating their stock options grant practices through independent committees— filed notices with the Securities and Exchange Commission stating delays in filing Form 10-Q quarterly reports. Many plan to restate earnings and incur charges to correct for irregularities stemming from recording discrepancies.
Some companies face delisting from stock exchanges, while others growing scrutiny from shareholders, some of whom are filing suits. In addition, stock prices for some companies fell as shareholder distrust heightened.
The U.S. Dept. of Justice came down hardest on communications company Brocade Communications Systems Inc. and software vendor Converse Technology Inc.
On Thursday, two former executives of Brocade, former president and CEO Gregory Reyes and former vice president of human resources Stephanie Jensen, were hit with a 12-count indictment for scheming to backdate stock option grants to give employees favorably priced options without recording necessary compensation expenses.
Both executives were charged with securities fraud by the U.S. attorney's office and the U.S. Securities and Exchange Commission (SEC) July 29—the first formal charges brought against companies implicated in the stock options scandal.
On Wednesday, the U.S. Justice Dept. charged three former executives of Converse with scheming to manipulate the granting of millions of dollars of stock options grants to themselves and their employees, between 1998 and 2002.
According to a Justice Dept. statement, the executives issued misleading financial statements to the company's shareholders and the investing public regarding the true value of the options grants.
By: DocMemory
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