Tuesday, June 27, 2006

Backdating and springloading

While various high-tech companies complain about the patent system and urge patent reform, some interesting new words are entering our vocabulary to describe bad acts of the high-tech execs.

"Backdating" occurs when executives are granted a stock option -
allowing them to sell a certain amount of company stock at a later date and pocket
any difference between the grant price and the sale price - after altering
the date the option was issued to take advantage of lower share value at an
earlier date.

"Spring-loading" is the practice of manipulating the date stock options
are granted based on insider information - say, the release of earnings
reports or new product announcements.

[see Rocky Mountain News, June 25, 2006]

Issues of patent reform seem almost trivial compared to this evil stuff.


Blogger Lawrence B. Ebert said...

Jill Nawrocki reports on Sept. 25, 2006:

The stock option backdating scandal is rapidly turning into the problem of the year for general counsel. In July, William Sorin became the first corporate legal chief to be criminally charged for suspicious option grants. Sorin was the outside GC of Comverse Technology Inc., for more than 20 years. He left the software manufacturer this past May.

Brooklyn, N.Y.-based federal prosecutors filed a criminal complaint and affidavit charging Sorin, former Comverse CEO Jacob Alexander and ex-CFO David Kreinberg with conspiracy to commit securities, wire and mail fraud. The defendants face a maximum five-year jail term if convicted. Sorin and Kreinberg were arraigned in federal district court in Brooklyn in August, but Alexander failed to appear.

According to the affidavit, the Comverse executives developed a scheme to backdate millions of dollars in stock options for themselves and other employees. In fact, every companywide grant between 1998 and 2001 was allegedly backdated. Originally based in New York, Comverse is now headquartered in Wakefield, Mass.

10:56 AM  

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