Cablevision Systems said it has received a grand jury subpoena from the U.S. Attorney’s Office for the Eastern District of New York seeking documents related to its stock options issues. The company also said in a regulatory filing that it received a document request from the Securities and Exchange commission relating to its informal investigation into these matters. The company assured stockholders it intends to fully cooperate with the investigations.
In addition, the company said that Richard Hochman resigned from the board’s compensation committee and the audit committee, and Victor Oristano resigned from the audit committee. Hochman and Oristano said in their respective letters that they believe it is in the best interest of the company for them to step down from these positions in light of the public attention generated by the company’s restatement tied to the stock option review, as well as “the numerous shareholder lawsuits filed in the wake of that decision naming them, among others, as defendants.”
The company also announced that it has restated its financial statements for the three years ended 2005, all quarterly periods in 2004 and 2005 and the first quarter of 2006. As a result, the company adjusted its net loss by more than $89 million for the period January 1, 1997 through March 31, 2006.
Cablevision also reported that derivative lawsuits have been filed in New York State Supreme Court, Nassau County, the United States District Court for the Eastern District of New York, and Delaware Chancery Court, by shareholders acting on behalf of the company. The lawsuits name as defendants certain present and former members of Cablevision’s board and certain present and former executive officers, alleging breaches of fiduciary duty and unjust enrichment relating to practices with respect to the dating of stock options, recordation and accounting for stock options, financial statements and SEC filings, according to the company’s regulatory filing.
In early August, the company said it had undertaken a voluntary review of its past practices in connection with grants of stock options and Stock Appreciation Rights (SARs). As a result of the review, the company determined that the date and exercise price assigned to a number of its stock option and SAR grants during the 1997 to 2002 period did not correspond to the actual grant date and the closing price of the company’s common stock on the actual grant date, it stated.
In addition to grant dating issues, the company’s review identified certain modifications made to outstanding stock option grants prior to 2002, principally extensions of expiration dates that were not accounted for properly, it reported in its filing.
Also, two awards of options and one option modification were incorrectly accounted for as having been granted to employees or modified for employees, it said. One of these two awards was to the company’s former compensation consultant (which was subsequently cancelled in 2003) and the other award related to an executive officer whose death occurred after the stated grant date of the award and before the actual grant date, the company noted.
“The company’s Board of Directors and senior management believe that the practices related to the granting of options Â are contrary to the high ethical standards they believe should apply to all of the Company’s business practices,” Cablevision stated in its filing.