Print this article | Return to Article | Return to CFO.com
Harvey Benenson, former advisor to Cablevision, will be the first to do so. He owes $2 million as part of a $34.4 million settlement in a lawsuit brought by investors.
David McCann and Stephen Taub, CFO.com | Europe
June 9, 2008
In what appears to be the first case of a compensation consultant paying a price for a company's stock-option backdating, Harvey Benenson, CEO of Lyons, Benenson & Co., is among 16 individuals who will pay a total of $34.4 million to settle a derivative lawsuit against Cablevision Systems.
Insurance is expected to contribute only $10 million toward the settlement. The remaining $24.4 million will come from Cablevision executives and directors and others, including Benenson, who was alleged in a complaint filed in 2006 to have participated in the company's options-dating process.
The settlement calls for Benenson to pay Cablevision $2 million over the next three years at a 6-percent annual interest rate. As collateral he will put up a mortgage on his home in New York's Long Island town of Bridgehampton. After the $2 million is paid, Cablevision will forgive $1 million of an unspecified loan previously given to Benenson. The debt forgiveness will be subject to federal income tax.
He also agreed to give up his right to $1.5 million that Cablevision had agreed to pay him when his consulting services were no longer required.
Benenson referred a call to his attorney, Tom Fleming of Olshan, Grundman, Frome, Rosenzweig, & Wolosky, who declined comment, as did Cablevision.
The $24.4 million to be returned to Cablevision will come from a combination of cash payments, repricing the exercise price of outstanding options and stock appreciation rights (SARs), return of outstanding common stock, restricted stock units, options, and SARs, and surrender of potential contractual claims.
Cablevision chairman Charles Dolan agreed to make a cash payment of $1 million. His son, chief executive James Dolan, will pay $366,250 to Cablevision for previously exercised options and will make a separate $1 million payment as well. The largest cash payment, $2.55 million, will be made by former general counsel Robert Lemle. The next-highest payment will be Benenson's.
"This is an extremely satisfying outcome for investors, not only for the significant financial recovery it represents, but because individual defendants are contributing more than two-thirds of the value of the settlement," said Stuart Grant, managing director of law firm Grant & Eisenhofer, which served as co-lead counsel in the lawsuit on behalf of plaintiff Teachers Retirement System of Louisiana.
Cablevision said in 2006 that it would restate its financials back to 1997 over its practices for awarding stock options. The company acknowledged in its Form 10-Q dated September 21, 2006, that the date and exercise price assigned stock options and SARs from 1997 to 2002 did not correspond to the actual grant date and the closing price of the company's common stock on that day.
However, Cablevision noted in its regulatory filing last Thursday that none of the current and former officers, directors, or other defendants who entered into the settlement agreement has acknowledged any liability or wrongdoing. It also noted that plaintiffs' counsel is seeking more than $7 million in fees and expenses from the settlement proceeds.
Among the more interesting allegations in the derivative lawsuit was that Cablevision had awarded stock options to a deceased executive, after his death, and backdated them to make it appear that the grants had been made while he was alive.