Human Capital & Careers

Borrowing to Backdate?

Via faked loan documents, an ex-CEO at Brooks Automation was able to shell out roughly $560,000 for 225,000 shares that were worth more than $6.3 m...
Stephen TaubAugust 1, 2006

In a twist to the stock option backdating scandal, Brooks Automation Inc. said in a regulatory filing that its former chief executive officer and two directors falsified loan documents so that the former CEO could exercise options three months after they had expired.

The company said that former CEO Robert Therrien, who in January said he would not seek re-election as chairman, was permitted to exercise options in November 1999 despite their expiration in August of 1999.

The transaction was previously accounted for as a loan by the company to Therrien for the purpose of permitting him to exercise the option, Brooks explained. Therrien and two other directors, Amin Khoury and Roger Emerick, who resigned in May, signed a ratification document that deemed Therrien to have been granted a loan as of August 1999, according to the filing.

In June 1999 the three discussed lending money to Therrien for the purpose of enabling him to exercise an option to purchase 225,000 shares of the company’s stock before its expiration in August 1999, the company reported. Therrien, Khoury, and Emerick could not be reached for comment, Reuters said.

In November 1999 the company deemed Therrien to have exercised the options in a timely manner, and accounted for the exercise without recognizing compensation expense, the company further explained.

Based on the findings of a probe by a Brooks special committee, the company later found, however, that Therrien “misrepresented the facts of the loan” and that the ratification document was false because there were no discussions in June 1999 concerning a loan.

As a result of the probe, the company—whose stock option practices are currently being investigated by the Securities and Exchange Commission and the U.S. Attorney’s office—found that the option expired in August 1999 and that compensation expense should have been recorded in connection with Therrien’s purchase of stock in November 1999. The company said Therrien shelled out roughly $560,000 for 225,000 shares that were then worth more than $6.3 million.

Brooks also reported that it would restate its results from 1996 through 2005 because stock options grants during that period were incorrectly accounted for under generally accepted accounting principles.

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