What the Media Does Not Cover About the SOBD Scandal? Employee Stress

There are a relatively few people that either profited or benefited enormously from the Options Backdating scandals. Lets assume that the top 10 executives in each of the high tech companies got the most number of stock options (> 70% of the grants). The rest of the employees also benefited but not as much.

Most of the companies currently under inquiry or investigation from the SEC are high tech, most have good products, a valuable franchise, over 1000 employees and many thousand customers that depend on them.

Most of these companies have to restate multiple years earnings due to tax and earnings implications. This cost comes from current year and next years bottom line. Add to the fact that customers get nervous when a company which was doing well now cannot state earnings for 3-4 quarters, and put off significant purchases, there is a significant risk these companies face after they have been asked to probe into their option grants.

Many of these companies have fired their top 2-3 executives - typically the CEO, CFO and Legal Counsel.

The point is: There are 1000 other employees and thousands of customers who suffer as a consequence.

Question: At what cost are we getting justice? Many of these companies will have to trim earnings, revenues and cut costs (possibly lay off people).

Is it not possible to just make sure the top executives resign and the rest of the company moves on - pay a one-time fine, pay taxes (estimated amounts) and move on with their lives?

“It is the greatest good to the greatest number of people which is the measure of right and wrong.” - Jeremy Betham

Article Source: http://EzineArticles.com/?expert=Mukund_Mohan

adam reeves | greg reyes

Communicating with Financial Analysts about Stock Options Backdating

Most Financial analysts (Buy and Sell Side) are likely aware of the inquiry from the SEC into your company. Your Investor Relations organization has to be:

a) Proactive about communicating

b) Forthright with what they know and dont know

c) Resist speculating the outcomes and possible causality

d) Be clear about timelines and milestones

e) Be honest about impact to employee morale, customer momentum and partner/supplier concerns.

Address these questions below in a clear, concise manner and you will have a better crisis handling experience:

1. Will the restatement have a material impact on your previous years earnings, revenues and cash flow, balance sheet, etc.?

2. What is the extent of the options backdating? How many instances and how long was this going on?

3. Have you formed a special committee to look into the matter? Who in the Board of Directors is heading up the audit committee? What experience do they have in dealing with crisis of this magnitude before?

4. What has your reaction from empoyees been? What actions are you taking to prevent mass exodus?

5. Are you going to lower earnings estimates and revenue targets since management will be distracted to solve this issue?

6. What are implications from a legal standpoint? How exposed are your Directors? What is the level of your DOE insurance?

7. What about customers? Are they concerned and what is their level of concern?

8. When do you expect to complete this process of investigation? What are the key milestones we should track?

9. Who all are going to be fired / let go because of this issue?

10. What is your process to continue ongoing communication with us on this issue?

Your IR and Finance team will not have all the answers, but these questions need to be brainstormed before you have the call with the analysts.

http://blog.vangal.com

options backdating | stock option backdating

Federal Judge Rejects Plea Deal Because of No Prison Time

On September 29, 2008, Federal Judge Cormac Carney rejected a proposed plea deal that would have given probation to Broadcom Corp. co-founder Henry Samueli. Samueli previously plead guilty to one felony count of making a false statement to the SEC. The Court's decision permits Samueli to withdraw that guilty plea.

Samueli is also listed as an unindicted co-conspirator in the federal indictment of Broadcom co-founder Henry T. Nicholas III, the company's former CEO, and William Ruehle, its former chief financial officer.

In his ruling, Carney noted that Nicholas and Ruehle, if convicted, could theoretically be sentenced to more than 300 years each in prison. Carney pointed out that people convicted in run of the mill fraud cases serve on average 17 months in prison. Carney also relied on the U.S. Probation Office's report that concluded probation was insufficient and recommended Samueli spend a year in prison.

Carney's ruling suggests that he agrees with the Probation report's conclusion that Samueli deserves to go to prison for lying to regulators about his role in an alleged $2.2-billion stock-option scam.

Carney rejected the plea deal for several reasons. The Judge believed that a significant prison sentence was warranted if the allegations are true. Judge Carney also criticized an unusual provision in the proposed plea. The provision called for Samueli to pay $12 million to the government even though the maximum fine permitted for the charge to which Samueli agreed to plead guilty is $250,000.

Judge Carney was not willing to accept a plea agreement that gives the impression that justice is for sale. He was concerned the payment provision would erode the public's trust in the fundamental fairness of the justice system.

Although it may be rare for a federal judge to reject a prosecution deal with a defendant, rejections have occurred more often recently.

Judge Carney, for example, sentenced money manager James P. Lewis Jr. to 30 years in prison. Mr. Lewis, who is 62 years old, has 22 years remaining on that sentence. Clearly Mr. Samueli, who is 53, would prefer to avoid a similar draconian result.

But there are few options available to white collar defendants when judges begin rejecting plea deals worked out with prosecutors. Who knows what the result would have been if Samueli had agreed to pay the $12 million as restitution, rather than as a fine?

Samueli is a defendant in an SEC lawsuit that says Broadcom's $2.2-billion understatement of compensation expense because of backdated options was the largest among a host of such cases the SEC looked into.

Judge Carney's ruling indicates that Samueli will spend some time in prison. This is no different than the fate of most federal white collar defendants.

Geoff Mousseau can be found on the web at [http://www.PrisonCampInc.com]

Article Source: http://EzineArticles.com/?expert=Geoff_Mousseau

gregory reyes | options backdating