Compensation

SEC Action May Delve Inside Black Box Corp.

The provider of networking products gets a Wells notice indicating there could be civil charges relating to stock-option backdating.
Stephen TaubJanuary 29, 2009

Black Box Corp. said it may face civil charges stemming from historical stock-option granting practices.

The provider of data and voice-networking products said in a regulatory filing that it had received a “Wells notice” from the Securities and Exchange Commission indicating that the staff intends to recommend that the regulator bring a civil injunctive action against the company. Under the process, recipients of a Wells Notice have the opportunity to respond before the Staff makes a recommendation to the SEC regarding what action, if any, should be brought by the SEC. Black Box warned the SEC may seek a permanent civil injunction and civil penalties.

The company said that it is evaluating the notice, and continues to cooperate with the staff with its questions about alleged violations and possible resolution of the matter.

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In 2007, Black Box received a subpoena from the SEC related to its stock-option practices one week after it revealed the regulator had opened a formal investigation into the matter. Earlier that year, Black Box disclosed that it would restate 15 years of earnings because of incorrectly priced stock options.

In addition, Fred C. Young resigned as chief executive officer and as a member of the board. He and a number of other executives were previously named in class action lawsuits stemming from the backdating practices.

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