Accounting & Tax

Options Probes Sprouting All Over

Three more companies acknowledge investigations; another source identifies five others that engaged in ''highly improbable patterns of options gran...
Stephen TaubMay 22, 2006

Software provider Openwave Systems, router maker Juniper Networks, and Internet media company CNET Networks on Monday disclosed inquiries into their stock-option granting practices.

Openwave announced that the Securities and Exchange Commission has launched an informal inquiry and is requesting related documents. According to the company, an SEC letter stated that the inquiry should not be construed as an indication by the commission or its staff that any violation of law has occurred, or as an adverse reflection upon any person, entity, or security. Openwave stressed it intends to cooperate fully.

Juniper disclosed that it received a request for information from the U.S. Attorney for the Eastern District of New York. The company intends to cooperate fully. Juniper added that its audit committee, assisted by independent counsel and advisers, is reviewing the company’s historical stock-option granting practices.

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CNET announced that its board has appointed a special committee of independent directors, assisted by independent legal counsel, to investigate past option grants, their timing, and related accounting matters. The company also noted that it was one of 17 companies identified earlier this month in a report by the Center for Financial Research and Analysis, which analyzed stock-option exercise prices relative to share-price ranges for certain companies during the period 1997 to 2002.

The company acknowledged that according to the report, CNET granted stock options on four occasions between 1998 and 2001 with exercise prices that matched or were close to a 40-day low for its share price.

The three announcements come even as The Wall Street Journal — which first raised the issue of options timing last year — on Monday identified KLA-Tencor, Meade Instruments, Trident Microsystems, Boston Communications Group, and Renal Care Group as having engaged in “highly improbable patterns of options grants.”